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research. 


Southern  Branch 
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University  of  California 

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COMMERCIAL  RESEARCH 


THE  MACMILLAN  COMPANY 

MEW  YORK   •    BOSTON   •    CHICAGO  •    DALLAS 
ATLANTA   •    SAN   FRANCISCO 

MACMILLAN  &  CO.,  Limited 

LONDON  •    BOMBAY  •    CALCUTTA 
MELBOURNE 

THE  MACMILLAN  CO.  OF  CANADA,  Ltd. 

TORONTO 


COMMERCIAL  RESEARCH 

An  Outline  of  Working  Principles 


BY 

C.  S.  DUNCAN,  Ph.D. 

Assistant  Professor  in  Commercial  Organization, 

School  of  Commerce  and  Administration, 

University  of  Chicago 


Jl^eto  gork 

THE  MACMILLAN  COMPANY 
1919 

AJl  righta  reserved 

40ZX5' 


COPTBIGHT,  1919 

bt  the  macmillan  company 


Set  up  and  electrotyped.     Published,  September,  1919 


^ 
^ 


TO 

B.  S.  D 

AND 

H.   S.  D. 


PREFACE 

The  theory  of  this  book  can  be  simply  stated ;  it  falls 
readily  into  a  series  of  propositions  which  have  guided 
the  writer  from  first  to  last  in  the  composition : 

•        1.  The  immediate  and  primary  need  of  business  to-day  is 
•j   intelligent  direction  and  control,  individually,  generally. 
^       2.  Intelligent  direction  and  control  of  business  can  be 
"^   had  only  by  a  better  knowledge  of  business  principles. 

3.  A  better  knowledge  of  business  principles  can  be 
if  derived  only  from  a  careful  and  comprehensive  survey  of 
^  business  facts. 

'^       4f.  To   secure   a   careful   and   comprehensive   survey   of 
business   facts  is  a  problem   for  business   research. 

^       5.  Therefore,  the  immediate  and  primary  need  of  busi- 
*?  ness  to-day  can  be  met  only  by  business  research. 

This  means,  also,  that  the  research  work  so  well  begun 
in  the  field  of  production  should  be  carried  over  into 
trade,  into  buying  and  selling.  The  beginning  and  the 
end  of  every  business  enterprise  is  a  marketing  problem. 
The  problems  of  marketing,  therefore,  like  factory  prob- 
lems, must  be  isolated,  abstracted,  analyzed  after  the 
scientific  method.  More  deliberate,  concentrated,  pro- 
longed and  undisturbed  thinking  ought  to  be  applied  to 
business  problems.  They  are  of  vital  importance  to  suc- 
cess ;  they  are  fascinatingly  interesting  in  themselves ; 
their  very  difficult  complexity  is  a  stimulating  intellect- 
ual challenge;  the  rewards  which  their  correct  solution 
offers   have  no   determinable   limit. 


vi  PREFACE 

It  is  further  held  that  more  intelligent  business  direc- 
tion and  control  is  better  business,  in  every  sense  of  the 
word.  In  commercial  activity,  as  in  every  other  field 
of  human  endeavor,  truth  sets  men  free, —  free  from 
narrow  tradition,  from  prejudice,  from  short-sighted, 
selfish  policies.  The  more  intelligent  business  of  to-mor- 
row is  certain  to  be  better  business. 

The  material  in  this  book  is  immediately  usable.  It 
is  not  an  abstract  and  general  preachment,  but  a  guide- 
book to  practical  research  methods.  It  is  applicable  to 
every  man's  business  whatever  the  type  or  size. 

The  writer  desires  here  to  state  publicly  his  appre- 
ciation of  the  sympathetic  interest  of  his  colleagues  in  this 
work.  He  is  more  indebted  to  the  helpfulness  of  Miss 
Margaret  Nichols,  of  Chicago,  for  her  skill,  speed,  accu- 
racy and  intelligence  in  transcribing  notes.  The  most 
he  owes  to  his  wife,  Beatrice  S.  Duncan,  for  her  continued 
help  and  encouragement. 

C.  S.  Duncan. 

Washington,  D.   C. 
August,  1919. 


TABLE  OF  CONTENTS 

PAGE 

Preface    v 

CHAPTER  I 
Introduction 1 


A  new  era  —  Cooperation  and  coordination  —  Use  of  scien- 
tific knowledge  —  Business  duties  —  After-the-war  trade  — 
Unsolved  problems  —  P'acts  and  experiences  to  be  utilized 

—  Old  calculations  invalid — Industrial  research  —  Com- 
mercial research  —  Purpose  —  The  plan  —  The  need  for  re- 
search —  Character  of  commercial  research  —  Sources  of 
business  facts  —  Nature  of  business  facts  —  The  method 
of  collecting  facts  —  Analysis  of  business  facts  —  Presen- 
tation of  business  facts  —  Interpretation  of  business 
facts  —  Organization  for  research  —  Some  fundamental 
principles  of  business  analysis  —  The  new  business  —  The 
material  —  The  method  —  The  point  of  view, 

CHAPTER  II 
The  Need  for  Commercial  Research 26 

Native  business  ability  —  A  new  element  in  business  — 
A  business  problem  —  Evidence  of  lack  of  knowledge  — 
Business  cycles  —  Maladjustment  in  business  —  New  busi- 
ness forces  —  Business  research  in  foreign  countries  — 
Research  in  the  United  States  —  A  research  bureau  — 
Educational  value  of  research  —  Conclusion. 

CHAPTER  III 
Character  of  Commercial  Research 54 

Spirit  of  research — Character  of  research  affected  by 
character  of  problem  —  Research  under  changing  conditions 

—  Point  of  view  —  Character  of  goods  —  Technological 
changes  —  Research  and  commercial  organization  —  Com- 
mercial research  for  the  manufacturer  —  Commercial  re- 
search for  the  wholesaler  —  Commercial  research  and  the 
retailer  —  Trade   and    science  —  Conclusion. 

vii 


viii  CONTENTS 


CHAPTER  IV 


PAGE 


Sources  of  Business  Facts 85 

Sales  records  —  Purchasing  records  —  Movement  of  goods 

—  Bargain  sales  —  Searching  the  books  —  Using  one's  sales 
forces — Research  department  —  Governmental  sources  of 
business   information  —  Merchandising   service   department 

—  Trade  journals  and  associations —  Reference  books  — 
Miscellaneous  sources. 

CHAPTER  V 
The  Character  of  Business  Facts 117 

Business  facts  and  principles  —  Precise  facts  —  Estimated 
values  —  Analysis  of  commodity  —  Trade  organization  — 
The  market  —  Population  statistics  —  Wealth  statistics  — 
Wages  and  prices  —  Per  capit  consumption  —  incomes  — 
Standards  of  living  —  Markets  for  specinl  commodities  — 
Direction  of  expenditur  —  Business  v>abits  —  The  will  to 
buy  —  Potential  markets  —  The  eifect  of  nationality  — 
Miscellaneous  factors  —  Concl  ision. 

CHAPTER  VI 
Methods  of  Collecting  Business  Facts 168 

General  principles  —  Methods  of  collecting  —  Filing  cards 

—  By  mail  —  The  questionnaire  —  The  person  t  be  ques- 
tioned —  Collector  of  data  —  The  document  itself  Sug- 
gestions for  using  the  questionnaire  -  Investigating  on 
basis  of   functions. 

CHAPTER  VII 
The  Analysis  of  Business  Facts 189 

Business  statistics  —  Steps  in  statistical  analysis  —  De- 
termining the  unit  —  Elements  of  error  —  Eliminating  er- 
rors —  Statistical  averages  —  Arithmetic  mean  —  The 
weighted  average  —  Index  numbers  —  The  median  —  The 
sampling  method  —  Conclusion. 

CHAPTER  VIII 
Presentation  of  Business  Facts 287 

Purpose  —  The  report  —  Useful  devices  —  Geometric  fig- 
ures —  Pictures  —  Models  —  Organization       chart  —  Tables 

—  Rules   and  cautions. 


CONTENTS  ix 

CHAPTER  IX  p^E 

Interpretation  of  Business  Facts 275 

Essentials  of  interpretation  —  Mechanical  and  mathemati- 
cal tests  —  Tested  by  new  angles  —  Test  of  adequacy  of 
data  —  The  test  of  immediate  serviceability  —  Test  of  too 
much  data  —  Indefinite  data  —  History  and  prophecy  in 
data  —  Business  facts  and  business  policies  —  Statistics  as 
a  method  —  Superiority  of  tables  —  Conclusion. 

CHAPTER  X 
Organization  for  Research 300 

Research  worlc  as  incidental  —  Research  department  — 
Trade  associations  —  The  advertising  agency  —  The  audit- 
ing firm  —  Business  research  companies  —  The  organiza- 
tion necessary  —  Training  of  the  investigator  —  Equipment 
for  research  work  —  Conclusion. 

CHAPTER  XI 

Some  Fundamental  Elements  of  Business  Analysis     .    330 

Three  fundamentals  —  Raw  materials  and  finished  prod- 
ucts —  Raw  materials  —  Finished  products  —  Classifying 
commodities  —  Scientific   analysis  —  Conclusion. 

CHAPTER  XII 
The  New  Business 356 

War  business  —  Business  ch  -ages  —  Persistent  phases  of 
business  —  A  new  spirit  —  Centralization  of  control  — 
Standards  of  business  —  The  emotional  appeal  —  The  ex- 
panded horizon  —  Mobilized  labor  —  Mobilized  industry  — 
New  legislation  —  New  aims  of  organization  —  The  cor- 
poration —  Better  organization  —  Control  of  essential  re- 
sources—  Socialization  of  industry  —  Productive  capacity 
of  a  people  —  Moi  e  intelligent  business  —  Conclusion. 


COMMERCIAL  RESEARCH 


CHAPTER  I 

INTRODUCTION 

A  new  era  —  Cooperation  and  coordination  —  Use  of  scientific 
knowledge  —  Business  duties  —  After-the-war  trade  —  Unsolved  prob- 
lems —  Facts  and  experiences  to  be  utilized  —  Old  calculations  in- 
valid —  Industrial  research  —  Commercial  research  —  Purpose  —  The 
plan  —  The  need  for  research  —  Character  of  commercial  research  — 
Sources  of  business  facts  —  Nature  of  business  f acts  —  The  method 
of  collecting  facts  —  Analysis  of  business  facts  —  Presentation  of  busi- 
ness facts  —  Interpretation  of  business  facts  —  Organization  for  re- 
search —  Some  fundamental  principles  of  business  analysis  —  The  new 
business  —  The  material  —  The  method  —  The  point  of  view. 

The  New  Era.  There  is  a  common  belief  that  a  new 
era  was  begun  with  the  recent  great  world  conflict.  It  is 
certainly  true  that  during  such  times  of  stress,  changes  in 
all  phases  of  life  are  both  rapid  and  radical.  The  ideas 
of  yesterday  that  were  new,  untried,  and  chimerical  may 
become  the  commonplaces  of  to-day.  As  one  looks  back 
over  the  past  years,  he  realizes  how  far  away  from  the 
pre-war  attitude  he  has  drifted.  These  changes,  rapid 
and  radical  in  character,  will  affect  us  all  in  our  manner 
of  thinking  and  in  our  way  of  living.  There  must  be  new 
adjustments;  there  must  be  new  relationships;  there  must 
be  a  revision  of  old  theories  and  a  planning  of  new  pol- 
icies. 

Such  a  belief  as  this  is,  of  course,  largely  made  up 
of  a  faith  whose  substance  is  the  things  hoped  for  rather 
than  what  has  been  demonstrated  or  experienced.  It  may 
be  that  through  the  fiery  trials  of  recent  years  human  re- 


2  COMMERCIAL  RESEARCH 

lationships  have  been  purified  and  made  nobler.  One  fact, 
however,  is  worthy  of  note ;  through  multifarious  social 
and  political  changes  trade  persists.  The  new  age,  like 
the  old,  will  be  built  on  a  foundation  of  commerce.  What 
this  commerce  is  to  be,  what  rules  of  the  game  are  to  be 
adopted,  what  organization  for  trade  will  result,  what 
prevailing  spirit  will  animate  it,  are  the  points  of  vital 
interest. 

Human  nature,  however,  is  made  of  a  tough  fiber  that 
is  hard  to  reshape.  After  every  severe  wrench  there  is 
a  reaction,  a  settling  back  toward  the  old  status.  What 
is  new  must  still  justify  itself.  Nevertheless,  it  would 
seem  obvious  that,  whatever  the  new  life  may  be  in  char- 
acter, it  must  be  different  from  the  life  of  the  past.  New 
forces  are  let  loose  in  the  world  that  will  not  be  curbed. 

There  will  be,  for  instance,  as  one  powerful  new  influ- 
ence, a  great  army  of  American  youths  who  have  seen  a 
new  world.  Their  view  will  have  become  broader.  They 
can  be  no  longer  so  provincial ;  they  will  have  learned  many 
things  which  they  cannot  forget.  The  new  life  in  all  its 
aspects  depends  very  much  upon  what  they  will  do  with 
what  they  learn.  At  home,  too,  there  have  been  new  ex- 
periences whose  influence  will  be  lasting.  An  instance  of 
this  is  government  control  over  industry  with  its  entirely 
new  basis  of  calculation.  The  great  contrast  between 
private  control  and  public  control  over  industry  is  that 
which  exists  between  cost  and  effectiveness.  The  broad 
aim  under  government  control  was  to  win  the  war, —  to 
marshal  all  possible  forces  eflPectively  for  an  uneconomic 
purpose, —  that  is,  to  destroy,  not  to  produce.  "  Victory 
at  any  cost "  became  the  slogan.  In  other  words,  the 
effectiveness  and  not  the  cost  was  the  primary  considera- 
tion. Under  private  control,  in  winning  trade,  cost  is  the 
first  question.     Only  the  most  temporary  policy  will  run 


INTRODUCTION  3 

the  price  returns  below  cost.  Otherwise  it  is  business 
suicide.  But  we  have  nevertheless  experienced  this  period 
of  centralized  control,  the  effectiveness  or  ineffectiveness 
of  which  we  shall  discover.  This  influence  will  not  soon 
pass    away. 

It  may  further  be  observed  that  this  is  not  an  adven- 
ture into  socialism.  Private  property  still  remains  pri- 
vate property  even  in  the  most  fundamental  productive 
enterprises.  For  the  moment,  and  for  the  purpose  of 
national  defense, —  a  defense  of  home  and  honor  as  well 
as  of  property, —  private  interests  are  submerged  in  pub- 
lic welfare.  But  there  is  as  yet  no  reason  to  believe  that 
with  the  disappearance  of  the  national  danger  private 
interests  will  not  again  emerge.  The  world  may  be 
greatly  different  after  the  war,  but  human  wants  will 
still  exist  and  the  economic  struggle  to  satisfy  them  will 
persist.  Business  will  resume  and  upon  a  pecuniary 
basis. 

Purchasing  power,  too,  has  been  greatly  changed.  This 
applies  not  only  to  the  United  States,  but  also  to  all  coun- 
tries touched  by  the  war.  Some  have  earned  money  who 
have  never  earned  it  before ;  many  others  have  earned  more 
than  they  ever  dreamed  of.  The  effects  of  this  redistribu- 
tion of  wealth  cannot  be  foreseen  in  their  full  import, 
though  it  is  apparent  that  changes  will  inevitably  be 
wrought  —  socially,  politically,  and  commercially.  This 
affects  both  individuals  and  nations.  The  center  of  grav- 
ity of  gold  has  been  disturbed.  There  was  established  an 
embargo  on  the  exportation  of  gold  from  the  United  States 
because  of  the  accumulated  reserves ;  the  same  thing  was 
done  in  England  because  the  supply  was  depicted.  Now 
that  these  artificial  barriers  are  gone  some  readjustment 
will  take  place. 

Wherever  one  turns  there  is  change.     Creditor  nations 


4  COMMERCIAL  RESEARCH 

have  become  debtor  nations,  and  vice  versa.  New  re- 
sources have  been  discovered  and  developed.  Supplies  and 
reserve  stocks  have  been  gauged  as  never  before.  Costs 
have  been  analyzed;  prices  have  been  set;  production  has 
been  stimulated;  consumption  has  been  rationed.  Knowl- 
edge and  experience  have  vastly  increased.  The  new  era 
is  one  of  greater  knowledge,  of  deeper  experience,  and  of 
broader  outlook. 

Cooperation  and  Coordination.  One  of  the  great  les- 
sons which  we  have  learned  from  the  recent  emergency  is 
the  value  of  cooperation  for  a  common  purpose  and  the 
coordination  of  all  activity  to  attain  this  common  purpose. 
A  part  of  the  new  era  for  the  world  will  be  the  experience 
derived  from  the  great  pooling  of  interests  among  the 
allied  people  by  putting  under  one  control  the  purchasing 
power  for  foodstuffs.  When  England  and  France  and 
Italy  are  willing  to  submit  these  elemental  demands  to  the 
judgment  and  will  of  a  foreign  commerce,  a  great  change 
in  world  attitude  has  arrived.  When,  also,  for  the  meet- 
ing of  a  common  danger  armies  of  allied  peoples  fight 
together,  even  intermingled,  the  experience  of  cooperation, 
of  coordinating  all  the  parts  of  a  vast  and  complex  mili- 
tary organization,  is  a  training  that  is  unusual  and  that 
will  bring  radical  changes.  The  people  of  the  United 
States  are  sharing  in  these  unusual  experiences.  But  not 
only  is  there  this  cooperation  and  coordination  between 
nations,  but  also  within  the  nation  there  is  the  same  tend- 
ency. Great  strides  have  been  made  in  the  United  States, 
for  example,  to  mobilize  industry  and  labor  and  trade  for 
a  common  end.  Never  before  have  so  many  business  men, 
trained  in  the  school  of  individualism  that  has  character- 
ized American  business  in  the  past,  willingly  accepted  out- 
side control  over  their  own  business  as  has  been  the  case 


INTRODUCTION  6 

during  the  crisis.  The  effects  of  this  experience  seem 
likely  to  be  of  a  lasting  character. 

Use  of  Scientific  Knowledge.  Another  new  experience 
has  been  a  greatly  increased  use  of  scientific  knowledge 
for  immediate,  practical  aims.  Many  laboratories  that 
formerly  were  set  apart  from  the  actual  business  world,  as 
a  place  where  truth  was  sought  for  truth's  own  sake,  have 
become  veritable  workshops.  In  mechanics,  physics, 
chemistry,  geology,  biology,  and  psychology,  skilled  sci- 
entists have  been  feverishly  eager  to  apply  their  knowledge 
to  difficult,  practical  problems. 

The  lack  of  cooperation  between  science  and  industry 
has  been  one  of  our  greatest  defects.  There  are  signs  of 
a  great  change  here,  however.  Nowhere  has  the  change 
been  more  marked  than  in  chemistry.  Nitro-starch  has 
been  obtained  from  corn ;  coal-tar  products  have  laid  the 
foundation  of  a  great  dye  industry;  the  sulphuric-acid 
output  was  doubled ;  the  supply  of  nitric  acid  was  in- 
creased tenfold.  {The  Nation,  December  18,  1918.) 
Only  the  trained  chemists  are  now  wanting  for  gathering 
the  fruits  of  this  knowledge. 

Furthermore,  men  are  to-day,  as  never  before,  thinking 
scientifically  in  terms  of  practical  policies,  and  they  are 
really  thinking  carefully  and  earnestly.  The  trained  mind 
is  to-day  much  more  in  demand  than  in  the  past  in  all  lines 
of  endeavor.  The  effect  of  this  new  experience,  also,  will 
not  soon  pass  away.  There  is  a  growing  respect  for  the 
power  of  thinking  logically  and  clearly  on  practical  mat- 
ters. The  specialist  is  now  getting  his  chance.  The 
tendency  in  modern  education  that  has  been  going  on  for 
the  past  quarter  of  a  century  is  now  being  put  to  a  test. 
Specialization  in  education  was  justified  in  theory  because 
it  allowed  a  more  complete  mastery  of  certain  well-defined 


6  COMMERCIAL  RESEARCH 

fields  of  knowledge.  This  kind  of  education  must  to-day 
justify  itself  by  results. 

This  new  experience  applies  to  all  phases  of  activity. 
Men  are  thinking  about  moral  questions  and  political  ques- 
tions as  well  as  about  the  practical  affairs  of  life.  They 
are  trying  to  look  farther  ahead  and  are  looking  with 
greater  concern  than  heretofore.  There  is  more  inquiry 
into  the  meaning  of  things ;  a  greater  desire  to  understand 
the  forces  that  are  at  work.  The  same  attitude  is  to  be 
found  among  business  men.  They,  too,  are  becoming  more 
thoughtful,  more  philosophical.  This  new  attitude  may 
not  bring  them  immediate  results ;  but  through  the  years 
its  accumulative  effect  will  be  inestimable. 

Business  Duties.  In  all  this  turmoil  and  stress,  in  spite 
of  lack  of  insight  and  foresight,  there  is  a  general  belief 
that  business  must  "  carry  on."  The  business  man  feels 
a  sense  of  duty  to  others  as  well  as  to  himself,  that  on  him 
is  laid  the  necessity  for  keeping  the  business  machinery 
moving.  He  understands  that  new  adjustments  must  be 
made  because  there  are  new  problems  to  meet.  He  feels, 
too,  that  business  must  become  more  flexible,  more  unified, 
more  intelligently  directed  than  it  has  been  in  the  past. 
He  has  seen  clearly  the  immediate  need  for  industry  and 
labor  cooperation.  He  indorsed  cordially  the  movement 
for  commercial  economy. 

All  of  this  meant  for  him  an  immediate  greater  control, 
more  external  direction  and  a  more  intelligent  guidance  of 
business  activities.  Under  changes  of  this  kind  the  busi- 
ness man  must  become  thoughtful  and  studious.  He  needs 
to  be  of  broader  gauge;  he  needs  to  study  business  intel- 
ligently. The  times  that  are  ahead, —  that  cannot  be 
foreseen  or  even  judged  confidentl}^  beforehand, —  are  cer- 
tain to  be  hard  times  for  him  who  is  unprepared. 


INTRODUCTION  7 

Out  of  this  experience  for  the  business  man  should  come 
a  great  lesson  of  what  may  be  called  the  use  of  thought 
in  business  relations.  The  new  business  should  be  a  more 
intelligent  business.  Have  we  not  in  the  past  been  de- 
ceived by  substituting  activity  for  brain  power?  Have 
we  not  given  ourselves  to  aggressiveness  of  physical  ac- 
tivity, rather  than  of  the  mind?  Has  there  not  been  too 
much  tendency  to  speed  rather  than  to  accuracy?  Has 
not  American  business  in  military  terms  been  more  in- 
terested in  rapid  fire  than  in  accurate  fire?  It  is  about 
such  questions  as  these  that  the  business  man  needs  to  be 
thinking  to-day.  However  much  slack  there  has  been  in 
the  application  of  physical  energy  to  business  enterprise, 
there  has  certainly  been  a  greater  margin  on  intelligent 
activity.  Where  this  is  the  case,  it  is  inevitable  that 
shortsightedness  and  exploitation  should  characterize  busi- 
ness habits. 

After-the-War  Trade.  There  is  a  great  deal  being  writ- 
ten to-day  about  the  "  war  after  the  war."  This  means 
that  after  the  conflict  with  armies  there  arises  the  conflict 
in  trade.  Nations  have  organized,  even  under  the  stress 
of  war,  as  never  before,  to  carry  on  trade  aggressively. 
There  is  in  Europe  a  concerted  movement  for  centralized 
control  of  all  business  activities.  This  will  mean  a  surer, 
a  more  direct,  and  possibly  a  more  intelligent  management 
than  has  been  the  case  in  the  past.  But  of  more  impor- 
tance than  any  type  of  organization  is  the  fact  that  ma- 
chinery is  being  put  in  operation  for  the  accumulation  of 
business  data.  This  is  not  a  movement  for  the  study  of 
historical  development  or  of  gaining  a  broader  knowledge 
of  world  aff'airs,  but  it  is  a  gathering  of  business  facts 
for  practical  use.  This  applies  both  to  domestic  trade 
and  to  foreign  trade.     It  is  an  evidence  of  the  fact  that 


8  COMMERCIAL  RESEARCH 

thinking  is  to  become  a  part  of  this  after-the-war  trade. 
In  that  struggle  there  will  be  men  trained  for  definite 
duties  in  the  same  manner  that  men  are  trained  for  mili- 
tary use.  There  will  be  coordination  in  trade  and  stand- 
ardization and  uniformity  of  practice,  such  as  has  not 
been  seen  in  the  past.  The  United  States  is  to  be  a  part 
of  this  trade  struggle,  and  the  business  man  must  be 
equipped  to  do  his  share. 

Unsolved  Problems.  The  United  States  entered  this 
conflict  with  many  vital  problems  unsolved.  Many  of 
these  had  to  do  directly  with  business  relationships.  In 
reality  we  had  not  made  a  serious  attempt  to  find  a  solu- 
tion for  them.  We  were  dilatory,  probably  because  we 
were  ignorant ;  —  they  seemed  so  complex,  so  difficult  to 
comprehend,  that  we  had  not  the  courage  to  face  them 
fairly  and  squarely  and  admit  that  a  satisfactory  solution 
must  be  found. 

The  result  has  been  that  in  the  crisis  when  difficulties 
have  risen  we  have  not  had  the  data  upon  which  to  base 
decisions.  There  have  been  committees  appointed  for  spe- 
cial investigations,  surveys  have  been  made  hastily  because 
of  the  great  need  for  immediate  action.  But  such  analysis 
can  never  be  satisfactory.  It  takes  time  for  the  accumula- 
tion of  sufficient  data  for  the  analysis  of  these  facts  and 
for  careful  thinking  about  all  the  different  phases  of  the 
problem.  There  is  the  ever  pending  labor  question,  there 
is  also  the  question  of  price  fixing,  there  is  the  question  of 
nonessential  activities.  We  must  reach  some  decision  in 
regard  to  these  things.  The  great  regret  is  that  we  have 
not  accumulated  in  the  years  of  opportunity  enough  data 
for  judging  these  problems  fairly. 

Facts  and  Experiences  to  Be  Utilized.  However  unpre- 
pared the  business  man  was  before  to  meet  these  difficulties 


INTRODUCTION  9 

it  now  becomes  a  duty,  and  there  is  now  the  opportunity  to 
see  that  our  experiences  are  made  use  of.  The  facts  that 
come  to  hand  should  not  be  lost.  We  must  see  that  our 
mistakes,  our  sacrifices  and  suffering  do  not  come  to 
naught.  Too  often  our  investigations  are  like  a  stream 
that  loses  itself  by  sinking  into  the  porous  soil.  They  are 
a  mere  expediency ;  they  get  nowhere.  Old  channels  of 
trade  have  been  blocked  and  new  channels  are  being  forced 
open.  There  is  revealed  to  us  a  disjointed  business  or- 
ganization. However  distressing  the  situation  is  for  indi- 
vidual business,  the  time  nevertheless  affords  an  unusual 
opportunit}'  for  study.  Just  as  the  scientist  may  put  a 
cross  section  of  the  plant  stem  under  the  microscope,  so 
to-day  the  student  of  business  affairs  may  see  a  cross  sec- 
tion of  business  activities.  If  proper  use  of  these  experi- 
ences and  of  the  facts  that  are  being  gathered  is  made,  it 
should  be  possible  to  start  the  new  era  more  nearly  right. 
There  is  here  a  great  duty  for  the  business  man. 

Old  Calculations  Invalid.  Due  to  the  many  significant 
changes  during  recent  years,  the  business  man,  whether  he 
desires  to  do  so  or  not,  must  make  new  calculations.  His 
markets  are  no  longer  as  they  were,  and  if  he  is  to  manage 
his  business  intelligently  he  must  discover  in  what  ways 
these  changes  have  been  made.  Farm  products  have  had 
a  period  of  unprecedented  high  prices.  Raw  materials  of 
all  sorts  have  found  an  insatiable  market.  Old  silver 
mines,  over  whose  doorways  the  spider  has  had  ample 
opportunity  to  weave  its  web,  are  reopened.  Urgent,  ef- 
fective demand  has  touched  with  its  magic  wand  many  a 
stolid-looking  rock  and  streams  of  profit  have  flowed  from 
them. 

There  will  be  an  inevitable  reaction.  Whether  or  not 
business  will  return  to  its  old  lines  of  activity,  the  future 


10  COMMERCIAL  RESEARCH 

only  can  reveal.  Probably  some  habits  will  need  to  be 
changed  even  against  our  will.  We  must  admit  that  we 
have  had  a  kind  of  crass  conceit  and  a  smug  egotism  in 
business  that  has  led  us  to  think  ourselves  superior  in 
many  respects  to  the  rest  of  the  world.  This  has  been 
our  provincialism.  It  now  stands  a  good  chance  of  being 
dissolved  in  the  crucible  of  international  responsibilities; 
and  here  again  new  calculations  must  be  made. 

Since  calculations  must  be  made  anew,  then,  there  is  no 
better  time  than  this  to  begin  aright.  Foundations  should 
now  be  laid  for  a  broad  survey  of  business  conditions.  In 
so  far  as  possible,  this  analysis  should  be  carried  on  along 
scientific  lines  so  that  the  results  will  be  dependable.  Nu- 
merous war  organizations  in  Washington  have  been  amass- 
ing data  of  prime  importance  to  business  men.  The  re- 
sult of  these  labors  should  not  be  permitted  to  be  lost,  for 
they  can  be  of  great  assistance  in  business  readjustments. 

Industrial  Research.  In  the  field  of  production  a  move- 
ment is  already  under  headway  for  industrial  research. 
This  has  meant  the  application  of  scientific  principles  to 
the  problems  of  production.  Out  of  it  there  is  arising  a 
new  science  called  the  science  of  management.  It  has  not 
yet  gathered  a  great  volume  of  facts,  nor  has  it  developed 
fully  its  working  principles.  The  aim  in  view,  however, 
has  been  clearly  defined.  It  is  to  plan  intelligently  all  the 
activities  that  have  to  do  with  a  business  concern.  "  Sci- 
entific Management,  in  its  broadest  aspect,  is  not  merely 
labor-saving  management ;  it  is  not  even  shop  manage- 
ment ;  it  is  industrial  management  by  the  scientific  method. 
It  is  not  limited  to  cost  and  production,  but  extends  to 
methods  of  distributing  and  marketing  the  product,  to 
meeting  the  changes  in  character  of  fashion  of  the  prod- 
uct, to  questions  of  concentration,  of  expansion,  of  reloca- 


INTRODUCTION  11 

tion,  of  finance,  etc.  Its  most  prominent  element  is  a 
mental  attitude,  and  its  result,  which  will  come  gradually 
within  the  next  twenty  years,  is  nothing  less  than  an  indus- 
trial revolution,  comparable  with  that  which  occurred 
when  the  factory  system  took  the  place  of  the  domestic 
workshop,  and  when  the  locomotive  supplanted  the  stage- 
coach."    (William  Kent,  "  Investigating  Industry,"  p.  5.) 

This  movement  is  now  in  great  need  of  leaders.  It 
takes  time  to  train  the  leaders  of  a  complex  movement  of 
this  kind.  It  is  a  matter  of  self-education,  and  education 
of  any  kind  is  necessarily  a  slow  process.  Sound  prog- 
ress may  be  made  slowly,  but  industrial  research  will  con- 
tinue to  gain  momentum.  In  order  to  show  the  scope  of 
the  movement  the  following  definition  is  given :  "  The 
foundation  of  Scientific  Management  is  scientific  investiga- 
tion, and  by  scientific  investigation  of  an  industry  we  mean 
the  critical  observation,  accurate  description,  analysis, 
and  classification  of  all  industry  and  business  phenomena 
relating  to  the  industry,  systematic  recording  and  apply- 
ing of  data,  drawing  conclusions  from  them,  predicting 
future  progress  under  existing  conditions  and  under  pro- 
posed changed  conditions."      {Ibid.,  p.  11.) 

Those  w^io  lead  in  this  great  movement  for  industrial 
research  are  styled  "  industrial  engineers."  Their  train- 
ing has  largely  been  a  technical  engineering  training,  but 
to  this  technical  work  they  have  added  usually  a  broad 
view  of  economic  problems  and  principles.  To  these  men 
has  been  given  the  task  of  constructing  a  set  of  workable 
principles  for  the  guidance  of  production  managers. 
They  have  taken  up  in  a  scientific  manner  such  questions 
as  the  location  of  plants,  the  construction  and  equipment 
of  factories,  the  processing  of  materials,  and  that  most 
difficult  of  all  subjects,  the  labor  problem,  with  its  time 


12  COMMERCIAL  RESEARCH 

and  motion  study,  and  bonus  plans.  Material  is  being 
accumulated  on  these  topics,  and  is  being  analyzed  in  a 
scientific  manner.  It  will  be  seen,  therefore,  that  the 
broad  program  stated  above  has  so  far  been  carried  out 
only  in  part.  One  large  field  of  research  has  as  yet  been 
practically  untouched.  This  is  the  domain  of  buying  and 
selling. 

Commercial  Research.  It  is  now  proposed  to  carry  this 
same  attitude  of  scientific  research  into  the  field  of  com- 
mercial organization.  What  the  industrial  engineers  are 
doing  for  production,  research  experts  must  begin  to  do 
for  other  phases  of  business  problems.  The  scientific  atti- 
tude is  to  include  all  business  activities.  A  program  of 
this  sort  means  that  the  attitude  of  research,  of  careful, 
scientific  analysis,  is  to  be  held  by  the  merchant  and  is  to 
be  carried  by  the  manufacturer  over  into  his  sales  depart- 
ment. 

This  task  is  a  most  difficult  one.  The  problems  in  com- 
mercial research  are  never  simple, —  nor  are  they  ever 
stable.  Most  of  them  are  complicated  by  that  intangible 
and  uncontrollable  factor  called  the  personal  equation. 
Commercial  research,  therefore,  calls  for  a  clear  mind  and 
patience  and  zeal  in  the  study  of  details.  "  Scientific  re- 
search in  marketing  is  evidently  not  an  easy  task,  espe- 
cially if  scientific  be  given  the  strict  definition  that  it  has 
in  production.  Of  the  importance  of  the  subject  of  mar- 
keting, however,  there  can  be  no  question,  as  a  few  facts 
will  show.  Forty  per  cent,  of  the  price  paid  by  the  ulti- 
mate consumer  for  a  pair  of  shoes  is  consumed  in  getting 
the  shoes  to  him  from  the  manufacturer,  exclusive  of  the 
manufacturer's  profit ;  that  is,  in  marketing  them.  For 
less  staple  commodities  this  percentage  is  yet  higher,  and 


INTRODUCTION  13 

even  on  so  staple  a  commodity  as  groceries  the  marketing 
margin  ranges  from  twenty-five  to  forty  per  cent.  The 
idea  is  not  that  this  margin  is  either  proper  or  improper, 
but  simply  that  it  is  a  pregnant  subject  to  investigate." 
(S.  O.  Martin,  "  Scientific  Study  of  Marketing,"  The 
Annals,  May,  1915.) 

The  undertaking  of  this  great  task  of  commercial  re- 
search means  a  far  greater  mental  effort  on  the  part  of  the 
merchant.  He  must  take  up  problems  from  a  new  point 
of  view.  Many  men  in  business  are  extremely  shy  of 
figures ;  the  simplest  arithmetical  or  algebraic  calculation 
perplexes  and  baffles  them.  Problems  clothed  in  figures 
are  to  most  men  a  thing  in  a  book,  to  be  studied  quite 
apart  from  practical  affairs.  The  drawing  of  a  simple 
chart,  also,  is  to  many  a  mysterious  process,  and  the  use 
of  maps  seems  beyond  the  capacity  of  most.  Neverthe- 
less, mathematics  in  its  simplest  form  can  make  a  notable 
contribution  to  business  management.  It  is  hoped  that 
the  day  is  not  far  distant  when  it  will  no  longer  be  neces- 
sary to  apologize  for  figures. 

It  will  appear  at  once  that  commercial  research  goes  far 
beyond  mere  figures.  It  looks  also  keenly  and  critically 
at  the  setting  or  framework  of  those  figures.  It  considers 
the  physical  and  psychological  surroundings.  Indeed, 
many  of  the  most  vital  things  in  a  business  survey  cannot 
be  tabulated.  But  the  actuarial  tables  that  have  been 
constructed  by  insurance  companies  have  shown  conclu- 
sively that  such  definite,  scientific  and  wholly  reliable  esti- 
mates can  be  made.  Such  tables  include  many  variables, 
but  they  have  become  well  founded  because  the  scope  of  in- 
vestigation has  been  broad  enough.  There  is  no  reason, 
therefore,  why  business  research  in  the  realm  of  buying 


14  COMMERCIAL  RESEARCH 

and  selling  should  not  make  as  great  contributions  as  other 
kinds  of  research.  This  very  difficulty  is  the  stimulating 
intellectual  challenge. 

Commercial  research  does  not  plan  to  stand  alone.  Its 
aim,  rather,  is  to  supplement  and  complete  industrial  re- 
search. One  of  the  primary  problems  of  industrial  re- 
search has  been  to  analyze  a  definite  task  into  its  compo- 
nent parts  in  order  that  it  may  be  more  fully  understood 
and  in  order  that  the  worker  may  be  fitted  more  intelli- 
gently and  harmoniously  into  his  task.  The  same  ideal 
is  held  by  commercial  research.  How  far  it  may  be 
carried  is  still  a  question.  "  What  specialization  and 
standardization  are  possible  in  marketing?  How  far  can 
the  experience  of  one  section  be  applied  to  the  method  of 
another.''  How  much  of  the  marketing  problem  is  human 
and  how  much  of  this  human  factor  is  determinable  and 
measurable.''  Must  marketing  always  have  its  practice 
guided  by  general  data,  averages,  modes,  proportions, — 
mass  phenomena  .-^  What  reorganization  is  desirable  and 
possible  in  the  present  system  of  marketing,  or  in  a  new 
system  developing.'*  These  are  absorbing  questions.  So- 
ciety has  permitted  large  margins  for  a  marketing  cost 
and  now  society  is  investigating  to  see  how  this  margin  is 
used.  There  is  a  tremendous  field  for  research.  The  po- 
tentialities are  hard  to  overestimate."  (S.  O.  Martin, 
"  Scientific  Study  of  Marketing,"  The  Annals,  May, 
1915.) 

Purpose.  The  purpose  of  this  discussion,  then,  is  to 
examine  this  task  of  commercial  research.  There  is  evi- 
dently a  long  process  yet  to  go  through  in  assembling  suf- 
ficient data  for  sound,  general  conclusions.  It  is  very 
much  worth  while,  however,  to  begin  this  work  systematic- 
ally and  under  some  sort  of  guidance  in  order  that  it  may 


INTRODUCTION  15 

be  done  with  the  greatest  degree  of  dispatch  and  intelli- 
gence. The  rules  of  the  game  need  to  be  stated,  even  at 
the  beginning.  It  is  proposed  here  to  undertake  a  com- 
prehensive statement  of  these  rules.  The  main  points  to 
consider  are,  of  course,  what  to  look  for,  how  to  get  it, 
how  to  analyze  it,  and  how  to  interpret  it.  These  general 
points  are  to  be  discussed  with  the  firm  faith  that  a  fuller 
knowledge  should  lead  to  better  business  practice. 

In  the  beginning  it  is  necessary  for  any  intelligent  study 
to  use  the  best  material  and  methods  available.  It  is  in- 
evitable that  these  methods  should  be  crude  and  the  mate- 
rial of  uncertain  value,  but  both  will  undoubtedly  improve 
with  progress.  In  this  new  work,  also,  the  business  man 
must  largely  educate  himself.  He  no  longer  has  the  time 
or  opportunity  to  take  up  a  formal  educational  course,  nor 
is  this  necessary.  The  hope  is  confidently  held  that  a 
clear  statement  of  the  problem  of  research  and  a  careful 
examination  of  ways  and  means  should  prove  suggestive 
and  helpful. 

The  Plan.  The  discussion  that  is  to  follow  has  been 
carried  out  with  a  definite  plan  in  view.  There  may  be 
some  question  as  to  the  logical  arrangement  of  material, 
but  in  general  the  attempt  has  been  made  to  follow  a 
natural  process  of  scientific  investigation.  The  various 
steps  in  this  process  will  here  be  indicated. 

1.  The  Need  for  Research.  Many  business  men  are 
just  awakening  to  the  need  for  more  careful  methods. 
Many  trade  associations  and  government  ofl'icials  are 
urging  a  uniform  system  of  accounting,  and  particularly 
that  the  items  of  cost  may  be  identified  and  recorded.  All 
of  these  things  work  for  better  business,  which  is  the  ideal 
of  commercial  research.  The  progress  along  these  lines 
means  greater  knowledge  from  year  to  year, —  a  greater 


16  COMMERCIAL  RESEARCH 

knowledge  of  facts  and  of  how  to  use  them.  This  is  the 
essential  element  in  the  business  of  the  future,  which  has 
here  been  called  the  new  business.  The  progressive  mer- 
chant must  join  in  this  movement.  "  It  was  found  that 
forty  per  cent  of  the  battalion  held  back  the  whole  num- 
ber three  seconds  in  jumping  the  trench,  thus  bringing 
them  all  under  machine-gun  fire  and  doubling  the  cas- 
ualty." {The  New  Republic,  June  22,  1918,  p.  229.)  It 
is  that  costly  three-second  error  in  business  that  research 
aims  and  needs  to  eliminate. 

2.  Character  of  Commercial  Research.  Commercial 
research  means  the  making  of  a  careful  and  comprehensive 
analysis  of  business  facts.  In  general  it  may  be  called 
a  study  of  business  data  by  careful  and  comprehensive 
methods  for  the  purpose  of  establishing  rules  of  action, 
of  discovering  the  best  commercial  practice,  and  of  formu- 
lating sound  business  policies.  It  is  the  applying  of  sci- 
entific principles  to  practical  business  problems.  Such  a 
movement  as  this  must  be  rooted  deep  in  an  attitude  of 
mind  which  may  be  characterized  as  one  that  is  thought- 
ful, logical,  clear,  and  patient  in  seeking  for  facts.  There 
is  no  easier  way  to  a  better  knowledge  of  business.  Hard 
mental  effort,  a  course  of  sustained  reasoning,  a  keen 
sense  of  relative  values,  an  untiring  energy  to  get  all  the 
facts,  a  relentless  will  to  pursue  the  investigation  to  a 
satisfactory  conclusion,  a  sympathethic  knowledge  of  hu- 
man relationships,  a  real  and  honest  desire  to  know  the 
truth,  however  uncomfortable  it  may  be,  a  constantly  open 
mind,  are  all  parts  of  commercial  research.  Business  is, 
of  course,  always  carried  on  for  profit ;  it  is  essentially 
selfish  and  must  continue  so.  Nevertheless,  business  does 
not  need  to  be  justified;  it  is  essential.  But  more  intelli- 
gent business  is  better  business  and  is  much  to  be  desired. 


INTRODUCTION  17 

3.  Sources  of  Business  Facts.  There  is  a  practical 
need  to  know  where  to  look  for  material.  It  can  be  demon- 
strated that  many  business  facts  are  already  available  to 
the  merchant  or  manufacturer.  The  only  obstacle  to 
their  use  is  a  knowledge  of  their  presence.  One's  own  rec- 
ords are  a  perennial  source  of  first-hand  data.  Libraries, 
for  instance,  public  and  private,  can  be  used  much  more 
extensively  by  the  practical  business  man.  The  govern- 
ment has  made  available  a  great  mass  of  data  for  any  one 
who  desires  to  use  them.  There  are,  also,  countless  pub- 
lications containing  material  of  practical  benefit.  Other 
facts  may  be  secured  by  a  direct  inquiry  either  by  mail  or 
through  personal  investigators.  A  constant  source  of 
materral  is  the  personal  observations  of  the  business  man 
himself.  Some  attention  to  the  problem  of  research  would 
give  a  training  in  observation  that  should  prove  of  very 
great  value. 

4.  Nature  of  Business  Facts.  To  work  intelligently 
one  must  know  how  to  recognize  the  significance  of  the 
material  with  which  he  deals.  Fortunes  have  been  made 
by  the  tardy  discovery  of  the  value  of  discarded  by- 
products. It  is  said  jocosely  that  to-day  all  of  the  pig  is 
utilized  by  the  great  packing  houses  except  the  squeal.  If 
the  business  man  is  to  make  a  thorough  and  intelligent  use 
of  the  information  available  he  must  inquire  into  the  na- 
ture of  business  facts.  The  facts  sought  by  one  engaged 
in  commercial  research  are,  of  course,  those  that  are  per- 
tinent and  essential  to  the  solution  of  the  problems  at 
hand.  Inquiry,  therefore,  is  to  be  made  as  to  what  form 
these  facts  assume,  as  to  what  changes  they  may  undergo, 
as  to  how  their  significance  may  be  determined. 

The  character  of  each  individual  problem  will  inevitably 
affect  the  data  to  be  studied.     What  is  most  significant  for 


18  COMMERCIAL  RESEARCH 

the  manufacturer  may  be  incidental  for  the  wholesaler  or 
retailer.  The  producer  may  interpret  everything  into 
terms  of  "  cost  " ;  the  distributor  may  translate  his  facts 
into  terms  of  "  value."  For  "  style  goods  "  certain  consid- 
erations are  of  primary  importance ;  for  "  novelties  "  the 
case  may  be  different,  and  "  staples  "  may  run  on  another 
basis.  Always,  however,  business  facts  are  a  means  to  an 
end  and  not  a  goal  in  themselves.  Facts  from  whatever 
source,  of  whatever  character,  are  the  working  materials 
of  business  research  in  all  its  phases. 

5.  Method  of  Collecting  Facts.  Another  inquiry  is  how 
to  get  the  facts.  If  they  are  all  about  one,  how  may  they 
be  assembled  in  an  economical  and  intelligent  fashion.'' 
Business  research  to  be  of  great  benefit  must  go  far  beyond 
the  experience  and  observation  of  the  individual.  One 
may  write  for  it  by  means  of  a  letter  of  inquiry  or  one  may 
frame  a  schedule  and  send  out  personal  investigators. 
From  one's  own  business  there  can  come  the  essential  in- 
ternal facts  which  may  be  made  available  through  a  prac- 
tical filing  system.  Various  ways  and  means  of  collecting 
essential  data  are  taken  up  in  this  discussion. 

6.  Analysis  of  Business  Facts.  Another  step  in  the 
process  of  business  research  is  careful  analysis.  This 
means  a  classification  of  the  data  that  have  been  collected. 
It  means  an  arrangement  of  this  material  according  to 
some  logical  principle.  Facts  must  be  put  in  shape  for 
presentation.  It  is  in  this  branch  of  the  work  that  the 
science  of  statistics  can  be  very  helpful.  The  business 
man  needs  to  know  how  to  use  those  statistical  methods  in 
his  own  problems.  A  large  number  of  them  are  simple  in 
character  and  easy  to  use.  By  means  of  them  one  may 
be  able  to  reduce  a  great  mass  of  heterogeneous  facts  to  a 


INTRODUCTION  19 

simple,  clear,  and  understandable  summary.     Always  the 
analysis  must  be  carried  on  for  a  definite  purpose. 

7.  Presentation  of  Business  Facts.  Another  part  of 
scientific  research  has  to  do  with  methods  of  presentation. 
A  study  of  this  kind  may  be  developed  into  an  art,  and  is, 
in  fact,  in  this  process  to-day.  It  is  the  application  of 
artistic  skill  to  utilitarian  purposes.  There  are,  however, 
simple  devices  and  elementary  principles  which  may  read- 
ily be  used  by  the  average  man  without  special  skill  or 
special  training. 

The  chief  aim  sought  by  methods  of  presentation  in 
commercial  research  is  to  clarify  the  facts  for  some  one 
who  is  to  use  them.  It  is  rare  that  a  business  problem  is 
simple  in  character,  or  that  the  most  significant  items  are 
apparent  at  a  glance,  or  that  the  entire  situation  can  be 
readily  visualized.  If  these  facts  are  to  serve  as  the  basis 
for  judgment,  if  they  are  to  be  translated  into  a  course  of 
action,  the  manager  before  whom  they  are  to  come  and 
who  is  a  busy  man,  must  be  able  to  comprehend  them 
quickly. 

The  process  of  collection  and  classification  must  have 
preceded  the  entire  problem  of  presentation.  Much  of  the 
preliminary  work  will,  in  fact,  have  been  done  in  making 
the  facts  intelligible.  Nevertheless,  the  process  of  fitting 
the  data  into  some  device  for  presenting  them  clearly  and 
vividly  is  necessary.  The  methods  of  presentation  take 
numerous  forms,  such  as  reports,  briefs,  charts,  graphs, 
maps,  tables,  and  so  on.  How  and  when  to  use  these  is 
discussed  in  non-technical  terms. 

8.  Interpretation  of  Business  Facts.  The  culmination 
of  the  research  process  is  in  the  interpretation  of  the  data 
that  have  been  collected  and  analyzed.     The  goal  of  com- 


so  COMIMERCIAL  RESEARCH 

mercial  investigation  is  to  translate  business  facts  into 
terms  of  business  practice  and  policy.  The  progressive 
business  man  refuses  to  be  deceived  or  to  remain  ignorant. 
He  is  anxious  that  his  business  may  be  carried  on  with 
more  intelligence  and  with  a  higher  degree  of  managerial 
skill.  In  order  that  this  aim  may  be  accomplished,  he 
needs  to  translate  his  knowledge  into  terms  of  business 
management.  This  is  the  last  step  in  the  process  of  busi- 
ness investigation.  It  is  likewise  the  critical  and  crucial 
moment.  Certain  tests  of  validity  and  certain  methods  of 
checking  up  have  been  indicated.  There  is  nothing  here, 
however,  that  can  displace  an  actual  common-sense  judg- 
ment. 

9.  Organization  for  Research.  Certain  devices  and 
machinery  are  necessary  for  carrying  on  the  work  of  re- 
search. The  character  of  this  equipment  will  depend 
upon  whether  the  business  man  organizes  his  own  research 
department,  whether  he  uses  the  advertising  agency,  or 
whether  he  seeks  the  special  services  of  a  research  com- 
pany. In  any  case  the  same  principles  of  organization 
and  the  same  equipment  are  required.  In  order  that  work 
of  this  kind  may  be  done  with  a  near  approach  to  scientific 
precision,  there  is  need  for  training  on  the  part  of  the 
individual  in  charge  of  the  work.  Some  discussion  is  given 
of  the  character  of  this  training  and  of  the  equipment 
necessary  for  satisfactory  investigation. 

10.  Some  Fundamental  Principles  of  Business  Analysis. 
When  a  sufficient  body  of  knowledge  on  commercial  prob- 
lems has  been  gathered  and  analyzed  there  will  develop  a 
set  of  general  principles  that  may  be  applied  to  any  prob- 
lem of  any  business.  These  are  fundamental  business 
principles.  They  can  only  be  the  result  of  extensive  com- 
mercial research.     A  survey  of  the  character  of  these  fun- 


INTRODUCTION  21 

damental  principles  will  be  made  in  order  that  there  may 
be  suggested  lines  of  inquiry  and  methods  of  research. 
These  principles,  also,  will  have  a  relation  to  business 
policies  which  result  from  a  fuller  knowledge  of  business 
facts.  They  will  aid  one  in  determining  what  is  just  and 
fair  in  business  practice.  The  beginning  of  business  faith 
should  be  a  belief  in  the  truth  of  the  statement  that  a 
better  knowledge  of  business  facts  will  inevitably  result  in 
better  business  practice  and  better  business  policy. 

11.  The  New  Business.  All  research  work  looks  to  the 
future.  In  doing  so,  it  must  turn  prophet  and  attempt  to 
anticipate  the  changes  that  are  coming.  This  future  is  to 
be  judged  most  accurately  from  past  experience  and  from 
present  tendencies.  The  progressive  business  man  desires 
to  be  prepared  to  meet  the  changes  which  will  affect  his 
own  business.  If  he  has  the  attitude  of  mind  necessary 
for  commercial  research,  he  will  also  want  to  know  where 
he  belongs  in  the  new  scheme  of  things.  It  is  desired,  also, 
that  there  may  be  a  greater  interest  in  business  problems, 
a  better  spirit  in  business  practice,  and  that  the  work  of 
the  business  man  may  be  made  much  more  than  mere  rou- 
tine and  guesswork. 

The  Material.  The  subject  matter  of  this  discussion  is 
almost  entirely  non-technical.  It  has  been  necessary  to 
use  some  of  the  terminology  of  the  science  of  statistics, 
but  in  every  case  these  terms  have  been  carefully  defined  in 
non-technical  language.  The  material  for  illustration  has 
been  taken  from  business  affairs.  The  principles  that  are 
developed  are  also  translated  into  business  terms.  It  is 
not  claimed  that  this  kind  of  material, —  the  real  factual 
material  from  business  affairs, —  makes  the  discussion  any 
better  or  any  worse.  The  aim  has  been,  only,  that  what 
is  said  may  be  fully  understood.      The  book  is  written  for 


22  COMMERCIAL  RESEARCH 

the  average  business  man  and  a  reasonable  amount  of 
intelligence  is  assumed.  Interest  in  business  problems  is 
also  taken  for  granted. 

The  subject  matter  here  is  intended  especially  for  the 
man  who  wants  to  know  more  about  his  own  affairs,  both 
in  detail  and  in  its  broader  aspects.  The  substance, 
therefore,  is  to  be  compared  with  the  apparatus  for  re- 
search in  physical  and  chemical  sciences.  It  is  intended 
for  the  study  of  business  problems.  If  it  attains  this  pur- 
pose, if  it  is  of  practical  value,  it  should  be  an  aid  to 
every  one.  The  advertiser,  for  instance,  is  coming  more 
and  more  to  need  the  equipment  for  business  research.  He 
is  developing  into  a  new  type  of  business  adviser.  For  the 
newer  specialists  in  business  investigation,  the  business 
research  and  development  companies,  there  should  be 
much  here  of  interest  and  of  practical  use. 

There  is  not  in  this  discussion  much  preaching  to  the 
business  man.  He  can  get  enough  of  this  from  other 
sources.  This  material  is  for  service  and  not  for  accusa- 
tion. It  is  intended  for  education  and  especially  for  the 
self-education  of  those  already  in  the  midst  of  the  game. 
Nothing  more  is  claimed  for  it  than  practical  suggestive- 
ness. 

The  Method.  There  is  to  be  found  here  a  discussion  of 
principles  and  not  of  historical  development.  Descriptive 
material  there  is  in  abundance,  but  only  for  illustrative 
purposes.  An  attempt  has  been  made  to  follow  a  natural 
process  in  thinking,  the  obvious  method  of  taking  a  prob- 
lem apart  in  order  to  understand  it  thoroughly.  When 
one  is  first  convinced  of  the  need  to  do  a  thing,  his  next 
inquiry  is  into  its  character  and  the  methods  for  doing  it. 
Such  is  the  underlying  principle  here.  Wherever  possible 
the  various  discussions  have  culminated  in  a  definite  state- 


INTRODUCTION  23 

ment  of  the  principles  involved.  Much  elementary  knowl- 
edge, of  course,  is  assumed  on  the  part  of  the  reader. 
Among  these  elements  experience  and  power  of  observation 
certainly  belong.  The  appeal  is  emphatically  intellectual, 
in  the  belief  that  such  emphasis  has  heretofore  been  want- 
ing in  business  writing.  The  statements  of  fact  and  prin- 
ciple are  made  as  direct  and  as  non-technical  as  possible. 

The  Point  of  View.  The  point  of  view  in  this  discussion 
is  frankly  practical  and  consciously  impersonal.  It  is 
written  for  the  business  man ;  for  his  use  and  not  for  his 
entertainment.  In  all  cases  where  it  has  been  possible, 
the  problems  involved  have  been  brought  to  a  practical, 
suggestive  issue.  Rules  will  be  found  here  of  such  sort 
that  they  may  be  actually  followed  in  daily  practice. 

It  is  hoped  that  sincerity,  also,  is  an  obvious  charac- 
teristic of  what  has  been  written.  Underlying  it  all,  there 
is  a  belief  and  a  faith  in  the  real  value  of  business,  in  its 
fundamental  soundness.  The  necessity  of  business  activi- 
ties is,  of  course,  assumed.  There  is  no  form  of  organiza- 
tion or  definite  system  that  is  criticized  or  commended. 
The  point  of  view  is  not  a  social  one.  There  is  no  ques- 
tion here  of  social  welfare  in  the  usual  sense  of  that  term. 
This  does  not  mean  that  such  problems  are  not  of  prime 
importance,  but  only  that  they  do  not  come  within  the 
range  of  this  discussion.  There  is,  nevertheless,  a  certain 
recognition  of  ethical  and  moral  problems.  It  is  always 
possible  to  have  a  clear  consciousness  of  the  existence  of 
such  questions  without  presuming  to  discuss  them. 

There  is  to  be  found  here,  too,  an  ideal  of  a  better 
business,  probably  a  more  satisfactory  business,  that  may 
be  gained  through  a  more  thorough  knowledge.  It  is  be- 
lieved that  in  business,  as  elsewhere,  the  truth  will  make 
men  free, —  free  from  bad  practices,  free  from  hidebound 


24  COMMERCIAL  RESEARCH 

tradition,  free  from  narrow  selfishness,  free  from  wasteful 
metliods,  free  from  unfair  competition.  While  there  is 
this  well-grounded  belief  in  knowledge,  there  is  no  self- 
deception  in  believing  that  a  great  mass  of  business  men 
can  quickly  gain  such  knowledge.  Education  is  a  slow, 
patient  process  of  intellectual  development.  Only  the 
most  terrible  experiences  can  quickly  change  the  main 
course  of  our  lives.  This  is  certainly  true  in  business 
activity.  Through  the  course  of  American  history  it 
can  be  found  that  old,  obsolete  customs  have  persisted  in 
spite  of  all  changes.  There  is  every  reason  to  believe  that 
such  will  continue  to  be  the  case. 

Business  relations  of  one  kind  or  another  permeate  all 
activities.  The  great  European  struggle,  for  instance,  is 
called  an  economic  struggle.  Economic  interest,  business 
considerations  run  like  a  purple  thread  through  the  fabric 
of  all  democratic  institutions.  It  may  be  that  even  democ- 
racy will  find  a  surer  basis  with  an  increase  of  business 
knowledge.  Certainly  in  the  making  of  the  laws  that 
control  us,  there  is  need  of  a  fuller  understanding  of  busi- 
ness affairs.  In  most  disputes  that  arise  there  is  need  of 
a  broad  knowledge  for  fair  settlements.  It  is  even  advo- 
cated to-day  by  some  that  a  study  of  business  has  a  great 
cultural  value.  There  is  apparent  a  tendency  for  prac- 
tical business  courses  to  engage  a  larger  and  larger  atten- 
tion in  schools  and  colleges. 

Whatever  is  the  real  truth  in  regard  to  these  questions, 
this  discussion  is  openly  practical.  But  on  the  other 
hand  it  is  not  meant  to  be  crassly  materialistic.  There  is 
meant  to  be  found  in  it  an  element  of  idealism;  nothing  will 
be  found  here  either  about  old  or  about  new  "  tricks  of  the 
trade."  Unfortunately  for  business  writing  such  things 
have  occupied  too  much  space  in  discussing  business  prob- 


INTRODUCTION  25 

lems.  On  the  other  hand,  there  is  no  attempt  to  seek 
truth  merely  for  truth's  own  sake ;  but  it  is  sought  for  the 
purpose  of  establishing  good  business.  Scientific  research 
of  every  kind  is  a  search  for  truth,  however  practical  this 
truth  may  prove  to  be.  Nor  is  there  anything  presented 
here  intended  for  the  purpose  of  exploitation,  although 
much  is  said  about  success.  There  is  nothing  of  get-rich- 
quick  methods,  but  much  of  profits.  In  general,  business 
is  looked  at  in  a  practical  and  impersonal  way  as  a  real 
man's  job, —  one  that  should  be  done  worthily.  It  is  for 
this  reason  that  there  is  not  in  this  discussion  much  senti- 
ment, though  there  is  strong  conviction.  This  book  is 
written,  on  the  whole,  for  those  who  are  willing  to  accept 
this  general  point  of  view. 


CHAPTER  II 

THE    NEED    FOR    COMMERCIAL    RESEARCH 

Native  business  ability  —  A  new  element  in  business  —  A  business 
problem  —  Evidence  of  lack  of  knowledge  —  Business  cycles  —  Mal- 
adjustment in  business  —  New  business  forces  —  Business  research 
in  foreign  countries  —  Research  in  the  United  States  —  A  research 
bureau  —  Educational  value  of  research  —  Conclusion. 

There  is  everywhere  a  growing  demand  for  a  better 
knowledge  of  business  principles.  In  the  future  commer- 
cial competition,  the  present  rule-of-thumb,  hit-or-miss, 
trial-and-error  methods  will  not  suffice.  Business  must 
become  more  nearly  like  an  exact  science ;  business  facts 
must  be  organized  on  a  sound,  safe,  dependable  basis. 
Practical  affairs  need  more  theory,  and  the  practical  man 
needs  must  be  more  thoroughly  grounded  in  abstract 
principles.  But  a  science  can  be  built  up  only  by  men 
who  are  free  from  the  daily  grind  of  routine,  free  from  the 
ever-pressing  burden  of  management,  free  from  the  multi- 
tudinous details  of  immediate  direction.  This  is  the  field 
of  commercial  research.  In  fact,  the  call  of  to-day  is  the 
call  for  business  research,  the  abstracting  of  the  real 
problems  of  real  business  for  the  purpose  of  careful,  unin- 
terrupted, scientific  analysis. 

Native  Business  Ability.  Hitherto  there  has  been  a 
kind  of  native  shrewdness  that  has  served  in  place  of  care- 
fully organized  business  knowledge.  This  shrewdness  was 
based  upon  years  of  experience,  a  natural  ability  to  ob- 
serve the  ways  and  reactions  of  people,  an  intimate  interest 

26 


NEED  FOR  COMMERCIAL  RESEARCH        27 

in  men  and  their  affairs,  together  with  an  abundance  of 
common  sense.  This  combination  of  qualities  has  been 
called  native  business  ability.  It  was  this  ability,  too, 
which  was  supposed  to  fit  a  man  for  any  kind  of  enterprise. 
It  dispensed  very  largely  with  the  need  for  formal  educa- 
tion ;  it  was  to  be  distinguished  from  theory  taught  by 
schools  as  being  an  attribute  of  a  practical  business  man. 

There  are,  to  be  sure,  many  examples  of  men  who  have 
made  notable  success  by  their  use  of  native  business  abil- 
ity. This  has  been  due,  in  part,  to  the  fact  that  the 
United  States  was  a  new  country  with  vast  undeveloped 
resources  and  unlimited  opportunities.  The  outlook  for 
the  future,  however,  is  far  different.  Competition  in  most 
lines  grows  keener  from  year  to  year.  The  self-made 
business  man  belongs  to  the  nineteenth  and  not  to  the 
twentieth  century.  There  will  doubtless  continue  to  be 
loose  methods  in  business  ;  too  many  business  managers  will 
continue  to  rely  upon  their  ability  to  "  size  up  "  a  situa- 
tion rather  than  to  analyze  that  situation  on  a  basis  of 
fact  and  determine  a  sound,  farseeing  policy  from  the  re- 
sults of  the  analysis.  It  will  become  ever  more  difficult  to 
carry  on  a  business  by  such  unscientific  methods. 

In  rural  districts,  for  example,  where  live  stock  is  pro- 
duced, there  are  buyers  who  go  to  and  fro  through  the 
countryside  and  purchase  the  stock  from  the  farmers  and 
collect  it  in  carload  lots.  These  buyers  are  usually  men 
of  experience  and  of  such  shrewdness  in  judgment  and 
offhand  calculation  that  they  are  able  to  guess  the  weight 
of  hogs  and  cattle,  even  in  droves  of  ten  or  fifteen.  It  is 
the  habit  of  these  buyers  at  times  to  buy  a  drove  of  hogs, 
for  instance,  at  their  guess  weight.  Frequently  it  hap- 
pens that  when  this  guess  is  tested  by  the  scales  it  proves 
to  be  reasonably  accurate.     In  our  great  railroad  organ- 


28  COMMERCIAL  RESEARCH 

izations,  even,  there  used  to  be  —  and  the  generation  may 
not  be  wholly  passed  —  a  group  of  men,  the  traffic  man- 
agers, who  had  developed  an  extraordinary  ability  to 
judge  the  rate  which  should  be  set  for  carrying  various 
commodities.  This  ability  was  generally  known  as  the 
intuition  of  the  traffic  manager.  Sometimes  it  was  right ; 
often  it  was  wrong.  It  used  to  be  said  of  the  marine  in- 
surance companies  that  in  setting  their  insurance  rates, 
they  first  looked  at  the  goods,  then  at  the  ship  which  was 
to  carry  them,  then  up  to  heaven  —  and  set  their  rates. 
It  was  once  the  custom  also  for  retailers  in  rural  stores  to 
measure  off  the  cloth,  as  they  sold  it,  on  their  arms  with- 
out the  use  of  the  measuring  stick.  Methods  of  this  sort 
were  found  everywhere,  but  they  were  crude  and  inaccu- 
rate. 

Generally,  the  man  who  was  most  successful  under  such 
a  system  was  he  who  developed  some  method  of  his  own  to 
reduce  to  a  minimum  the  common  inaccuracies  in  calcula- 
tion. The  man  who  guesses  most  surely  under  such  a 
system  as  this  is  the  man  with  a  natural  gift  for  business. 
It  is  generally  said  of  him  that  "  he  has  a  head  for  busi- 
ness." This  may  mean  also  that  he  can  see  business  op- 
portunities and  has  sufficient  daring  and  nerve  to  take 
advantage  of  them.  All  of  these  are  undoubtedly  good 
qualities  to  have.  They  have  brought  success  to  many  a 
business  man.  It  cannot  be  denied,  however,  that  even  the 
most  successful  of  these  men  would  have  done  better  still 
with  better  methods.  The  use  of  accurate  scales  and  of 
the  yardstick  has  saved  to  society  untold  waste. 

Superior  ability  in  guessing,  or  in  knowing  by  intuition, 
is  generally  the  result  of  native  ability  trained  and  disci- 
plined by  experience.  The  expert  stock  buyers  at  the 
great  packing  centers  have  only  refined  upon  the  method  of 


NEED  FOR  COMMERCIAL  RESEARCH        29 

the  country  buyers.  Men  on  the  grain  exchanges  who 
grade  wheat  and  corn  by  government  standards  have  only 
carried  to  a  greater  degree  of  perfection  the  methods  of 
the  country  grain  buyer.  The  progressive  marine  insur- 
ance companies  have  continued  to  look  at  the  goods  and  at 
the  ship  which  is  to  carry  them,  but  they  have  looked  with 
a  far  greater  degree  of  intelligence  than  formerly.  The 
traffic  managers  of  the  railroads  under  the  wise  guidance 
of  the  Interstate  Commerce  Commission  are  "  scrapping  " 
their  intuition  and  are  adopting  scientific  principles  for 
rate  making.  This  change  from  simple,  crude,  and  inac- 
curate methods  to  the  application  of  well-founded  princi- 
ples is  becoming  a  characteristic  of  American  business 
to-day. 

It  is  not  claimed  that  a  course  in  formal  education  is 
necessary  for  business  success.  Some  men  have  the  ca- 
pacity to  work  out  a  set  of  principles  for  themselves  to 
guide  them  in  their  business  activities.  They  benefit  by 
their  own  failures  and  successes,  and  by  the  experience  of 
other  men  around  them.  Although  these  principles  may 
never  be  definitely  phrased,  or  even  clearly  perceived  by 
these  business  men  themselves,  they  are  yet  able  to  apply 
certain  standards  of  conduct  to  their  own  business  prob- 
lems. The  experiences  of  such  men,  however,  may  be  lost 
to  a  new  generation  unless  in  some  way  they  are  con- 
served and  made  available  for  a  new  group  of  business 
managers.  This  transmission  of  business  principles  can- 
not be  done  successfully  by  a  series  of  letters  from  a  self- 
made  merchant  to  his  son  or  by  the  informal  training 
given  in  the  business  itself.  There  is  great  need  that  busi- 
ness experience  be  recorded  and  be  analyzed  for  the  pro- 
motion of  commercial  analysis.  This  is  the  new  duty  in 
business  to-day. 


30  COMMERCIAL  RESEARCH 

A  New  Element  in  Business.  The  day  of  shrewd 
guesses  in  business  is  fast  drawing  to  a  close.  The  urgent 
demand  now  is  for  facts  which  have  been  carefully  col- 
lected and  scientifically  analyzed,  and  which  afford  to  the 
new  business  manager  a  solid  basis  for  preparing  his  plan 
and  administering  his  work.  This  means  that  the  old 
rule-of-thumb  methods  must  be  discarded  and  that  an 
approach,  at  least,  to  scientific  analysis  must  be  made. 
This  means,  also,  that  there  is  to  be  no  longer  the  dis- 
paraging comparisons  between  the  practical  and  the  theo- 
retical business  man.  Theories,  if  correct,  are,  after  all, 
only  principles  which  are  to  be  applied. 

He  is  certainly  an  impractical  business  manager  whose 
accounting  system  is  so  inaccurate  that  he  does  not  know 
his  own  costs.  It  must  also  be  a  proof  of  the  impractical 
character  of  the  general  retailer  that  most  of  the  retail 
associations  are  organizing  educational  departments. 
Even  the  National  Credit  Men's  Association  finds  it  neces- 
sary to  educate  the  retailer.  This  can  only  mean  that 
the  so-called  practical  business  man  is  found  to  need  more 
instruction  in  the  theory  of  business.  Theories,  however, 
that  are  safe  to  apply  must  develop  out  of  a  great  mass 
of  facts.  It  is  the  duty  of  commercial  research  to  accu- 
mulate these  facts. 

In  the  field  of  production  something  has  already  been 
done  toward  applying  scientific  principles  to  business  ac- 
tivities. The  whole  movement  for  scientific  management 
has  placed  an  emphasis  upon  a  careful  and  detailed  analy- 
sis of  each  production  problem.  Increase  of  output,  elim- 
ination of  waste  motion,  reduction  of  cost  have  been  the 
chief  aims  in  view.  It  has  been  long  since  realized,  how- 
ever, that  scientific  analysis  could  not  stop  with  the  pro- 
ductive process.     The  whole  field  of  business  must  be  its 


NEED  FOR  COMMERCIAL  RESEARCH        31 

realm.  As  yet,  on  the  marketing  side,  the  movement  has 
made  but  little  progress.  There  are,  of  course,  good  rea- 
sons for  tliis  being  true. 

In  the  first  place,  it  was  a  far  easier  matter,  though  in 
itself  difficult,  to  isolate  and  define  the  problems  of  produc- 
tion because  they  are  largely  internal  problems ;  that  is, 
they  are  confined  within  the  four  walls  of  the  factory.  In 
large  part,  also  these  problems  have  to  do  with  inanimate 
objects,  with  crude,  lifeless,  inert  materials  that  are  to  be 
reshaped.  Control  over  these  can  be  practically  absolute. 
In  so  far  as  these  problems  can  be  isolated  from  outside 
influences  they  are  analogous  to  experiments  in  chemical, 
physical,  or  biological  laboratories.  In  marketing,  on  the 
other  hand,  there  are  many  intangible  and  uncontrollable 
factors.  Only  recently  have  business  men  begun  to  realize 
the  value  of  psychology,  yet  this  is  only  one  field  into 
which  they  need  to  enter.  The  commercial  phase  of  busi- 
ness is  an  exceedingly  complex  affair.  The  merchant  has 
no  single  or  simple  duty ;  he  has  a  great  bundle  of  relation- 
ships of  many  kinds.  He  has  to  deal  with  people  whom 
he  meets  as  equals,  over  whom  he  has  no  direct  control,  as 
well  as  with  the  inert  goods  on  his  shelves  and  the  sales 
force.  Every  merchant,  every  manufacturer  who  has  ma- 
terials or  services  to  sell,  has  always  two  great  problems ; 
one  a  problem  of  internal  management,  and  the  other  the 
external  problem  of  securing  customers.  Both  of  these 
are  intricate  and  complex. 

A  Business  Problem.  As  an  example  of  the  character 
of  the  business  man's  problem,  take  the  management  of  a 
mercantile  warehouse.  It  would  seem  to  be  a  relatively 
simple  affair ;  it  is  not  so.  There  may  come  into  this  ware- 
house all  sorts  and  conditions  of  goods.  They  may  be 
salt,  tobacco,  gloves,  tea,  leather,  machinery,  jewels,  and 


32  COMMERCIAL  RESEARCH 

merchandise  of  every  kind.  It  is  the  primary  duty  of  this 
warehouse  man  to  return  all  commodities  in  as  good  con- 
dition as  he  received  them.  Some  of  them,  however,  are 
perishable  and  will  deteriorate  very  easily.  Many  of  them 
cannot  be  placed  together  in  the  same  compartment. 
There  is  also  the  question  of  the  quantity  of  light  which  is 
to  be  permitted  to  enter ;  there  is  the  question  of  humidity 
of  the  atmosphere ;  there  is  the  question  of  temperature. 
There  is  also  the  problem  of  keeping  records  in  order  that 
at  an  instant's  notice  the  manager  may  report  the  amount 
of  goods  on  hand,  the  character  of  the  goods,  by  whom 
sent,  and  to  whom  they  are  to  be  delivered.  He  must 
know,  also,  the  space  that  is  available  for  storage  at  all 
times.  He  must  establish  connections  so  that  the  goods 
will  come  to  him  for  safe-keeping,  and  he  must  be  ready 
to  accommodate  the  merchant  who  may  ask  for  them  at 
any  time,  and  in  any  quantity.  For  all  these  services  it  is 
also  his  duty  to  set  a  rate  of  charge.  He  must  study  his 
business  in  its  broader  aspects  as  to  what  forces  are  at 
work  to  increase  or  decrease  his  usefulness, —  where  he 
belongs  in  the  scheme  of  things.  This  warehouse  man, 
therefore,  to  meet  all  his  problems,  must  know  something 
of  the  physical  and  chemical  sciences,  something  of  me- 
chanical engineering,  something  of  accounting,  something 
of  labor  management,  and  in  addition  he  must  be  a  mer- 
chant of  his  services.  If  he  chances  to  be  in  charge  of  a 
cold-storage  warehouse,  his  technical  knowledge  must  be 
greatly  increased.  This  will  serve  to  illustrate  the  com- 
plex character  even  of  the  business  man's  simple  problem 
and  will  show  how  difficult  a  task  it  is  to  apply  the  princi- 
ples of  research  to  such  problems. 

There  have  been  notable  examples  in   recent  years  of 
men  with  technical  engineering  training  who  have  proved 


NEED  FOR  COMMERCIAL  RESEARCH        33 

to  be  extraordinarily  good  business  men.  Some  of  these 
may  have  been  exceptional  cases.  There  are,  however, 
certain  reasons  which  might  tend  to  explain  their  notable 
success.  An  engineer  is  a  man  who  has  been  educated  to 
apply  his  knowledge  of  principles  to  the  concrete  prob- 
lems at  hand.  It  has  also  been  a  part  of  his  education  to 
reduce  these  problems  to  an  exact  and  simple  statement. 
He  has  been  trained  to  express  abstract  ideas  in  mathe- 
matical formula?  so  as  to  reveal  clearly  and  definitely  their 
relationships.  It  may  be  that  this  kind  of  education  has 
given  him  an  ability  to  apply  abstract  economic  principles 
to  business  problems. 

A  scientific  study  of  business,  after  all,  is  little  more 
than  a  thorough  understanding  of  business.  This  under- 
standing must  include  a  mastery  of  the  underlying  princi- 
ples, together  with  the  reason  for,  and  method  of,  applying 
them.  The  aim  in  scientific  research  is  not  only  to  iden- 
tify the  principles  involved,  but  also  to  enable  the  investi- 
gator to  gain  a  mastery  over  these  principles.  A  knowl- 
edge of  facts  is  very  largely  worthless  until  that  knowl- 
edge has  been  transformed  into  the  workable  wisdom  of 
policy  and  of  practice.  Scientific  principles  in  business, 
as  elsewhere,  are  of  no  value  unless  they  are  usable.  Com- 
mercial research  has  for  its  aim,  first,  to  accumulate  facts 
and,  second,  to  deduce  from  these  facts  certain  principles 
which  may  be  applied  to  the  solving  of  business  problems. 

Evidence  of  Lack  of  Knowledge.  Business  men  to-day 
need  to  know  not  only  more  about  their  own  business,  how 
to  keep  careful,  accurate  records  of  costs,  how  to  buy  and 
how  to  sell,  and  what  business  policies  to  establish,  but 
they  also  need  to  know  more  about  business  in  general. 
There  are  many  important  problems  that  are  still  unsolved 
and  which  can  be   solved   only  by   a   fuller  and  broader 


34  COMMERCIAL  RESEARCH 

knowledge.  Heretofore,  the  last  appeal  of  the  business 
man  who  cannot  understand  why  his  competitor  does  busi- 
ness more  successfully  than  he  does,  was  to  the  law  courts. 
He  called  upon  the  government  to  handicap  his  competi- 
tor, in  order  that  he  might  carry  on  business  in  his  own 
wasteful  way.  This  is,  of  course,  a  shortsighted  and  un- 
wise policy.  The  only  means  to  rid  ourselves  of  it  is  to 
know  more  about  business.  The  general  business  man  is 
altogether  too  narrow  in  his  outlook.  His  policies  are 
too  selfish  and  too  shortsighted.  Any  business  that  is 
worth  while  should  be  founded  for  permanency.  The  day 
of  "  get-rich-quick  "  methods  is  almost  gone.  Some  big 
fundamental  problems  loom  just  ahead  which  the  business 
men  of  to-day  and  to-morrow  must  solve. 

There  has  been  in  American  business  a  generally  ac- 
cepted principle  that  competition  is  necessary  for  the  best 
type  of  business.  We  have  gone  so  far  in  this  matter  as 
to  pass  laws  which  enforce  the  application  of  the  principle 
to  business  generally.  We  are  committed  to  "  enforced 
competition,"  and  yet  the  ideas  of  many  men  on  this  sub- 
ject are  changing.  Evidence  of  this  fact  appears  on 
every  hand.  Even  before  the  Supreme  Court  of  the 
United  States  passed  judgment  on  the  Standard  Oil  Com- 
pany and  the  American  Tobacco  Company  in  1911,  and 
developed  in  their  decisions  what  has  since  been  known  as 
"  the  rule  of  reason,"  the  attitude  of  many  men  toward 
big  business  had  been  greatly  modified.  One  of  our  Presi- 
dents even  divided  the  much  abused  trusts  into  those  that 
were  good  and  those  that  were  bad.  This  change  has  gone 
so  far  that  the  Federal  legislature  in  April,  1918,  passed 
a  law  specifically  permitting  combinations  to  carry  on 
export  trade.  It  is  now  possible  for  large  concerns  and 
small  to  organize  a  single  centralized  selling  company  to 


NEED  FOR  COMMERCIAL  RESEARCH       35 

handle  their  products  whether  these  businesses  are  com- 
petitors or  not. 

But  even  to-day,  under  the  strict  laws  that  compel  com- 
petition of  all  kinds  in  domestic  trade,  we  do  not  know  for 
a  certainty  that  the  principle  is  sound.  We  have  no  sure 
knowledge  of  the  general  effect  of  large-scale  business. 
Some  maintain  that  the  savings  of  large  combinations  are 
all  mythical.  Others  hold  that,  uncurbed,  these  businesses 
will  dominate  in  the  country  more  and  more.  For  a  solu- 
tion of  this  difficult  problem  there  is  need  of  more  facts. 
We  do  not  to-day  know  enough  to  decide  this  matter. 

There  is  another  very  important  question  which  con- 
cerns American  business  practice.  This  is  the  question  of 
fixed  or  maintained  price.  Shall  the  manufacturer  who 
has  identified  and  branded  his  goods  and  who  has  adver- 
tised them  nationally  have  the  right  to  stipulate  at  what 
prices  they  shall  be  resold  by  the  jobber  and  the  retailer? 
To  this  query  there  is  a  divided  answer.  On  both  sides 
there  are  many  strong  arguments.  Such  a  question,  how- 
ever, can  receive  a  satisfactory  answer  only  when  the  full 
effects  of  the  practice  are  known.  These  consequences 
cannot  be  known  until  more  facts  are  secured.  In  order 
to  secure  these  facts  a  wide  and  careful  research  is  needed. 

Another  phase  of  American  business,  which  is  of  very 
great  importance  to-day,  is  the  question  of  unfair  methods 
in  business  practice.  What  is  an  unfair  method  .'^  No 
one  can  answer  this  in  an  authoritative  manner.  The 
courts,  high  and  low,  have  not  yet  agreed  upon  any  legal 
definition  of  unfair  business  methods.  The  Federal  Trade 
Commission  has  not  yet  reached  any  conclusive  decision. 
Business  men  have  different  opinions  on  the  subject.  It 
would  appear  that  the  only  safe  answer  can  be  made  on 
the  basis  of  the  results  which  follow  from  certain  methods. 


36  COMMERCIAL  RESEARCH 

After  all,  a  method  can  be  called  fair  or  unfair  only  as  it 
works  out  fairly  or  unfairly  in  actual  practice.  The 
facts  are  still  waiting  to  show  whether  practices  work  out 
fairly  or  unfairly.  These  facts  can  be  secured  only  by  a 
broad  and  careful  research.  No  valid  conclusion  can  be 
drawn  from  single  instances.  A  wide  prospect  only  can 
reduce  individual  experience  to  its  proper  perspective. 

Economists  have  long  called  attention  to  the  fact  that 
there  is  a  great  need  for  a  better  adjustment  of  produc- 
tion to  consumption.  To-day  it  is  said  that  business  as  a 
whole  has  no  plan.  This  means  that  there  is  no  general 
scheme  for  adjusting  the  productive  plans  to  meet  the 
changes  in  demand.  Within  a  plant  or  within  a  store 
there  is,  of  course,  generally  speaking,  a  sufficiently  clear 
plan  of  processing  materials,  of  buying  and  selling.  The 
manufacturer  makes  out  a  definite  productive  scheme 
which  he  is  to  follow  for  the  coming  three,  six,  or  twelve 
months.  He  makes  his  purchases  of  raw  materials  to  suit 
this  plan.  He  adjusts  his  manufacturing  processes  to 
turn  out  the  finished  product  in  accordance  with  this  plan. 
The  merchant  likewise  purchases  his  goods  for  the  coming 
season  and  adjusts  his  selling  plans  to  carry  these  goods 
off  his  shelves.  Within  these  establishments,  then,  there  is 
a  plan  or  organized  effort,  but  in  society  as  a  whole,  within 
large  districts  or  within  national  boundaries,  there  is  no 
one,  no  group  of  people,  to  tell  what  should  be  done. 
This  phase  of  economic  activity  is  said  to  be  chaotic. 
Planlessness  is  characteristic  of  all  kinds  of  production 
within  these  larger  groups. 

Farmers  of  every  neighborhood  plant  those  things  which 
their  neighbors  have  found  to  be  successful,  with  little 
regard  to  the  general  consequences.  It  is  well  known  that 
this  often  leads  to  overproduction  in  certain  lines.     In  the 


NEED  FOR  COMMERCIAL  RESEARCH        37 

cities  the  manufacturers  are  just  as  prone  to  concentrate 
on  certain  lines  of  goods.  For  years  the  market  could  not 
take  care  of  enough  steel  products  to  enable  the  steel 
plants  to  run  at  more  than  65%  capacity.  The  same 
thing  must  be  true  in  many  other  lines.  This  undesirable 
characteristic  of  business  can  be  eliminated  only  by  a 
more  complete  knowledge  of  conditions.  This  fuller 
knowledge  can  be  secured  only  through  research.  And 
since  it  is  obvious  that  the  lack  of  planning  in  production 
will  be  manifested  in  selling  because  the  sales  force  must 
take  care  of  what  has  been  produced,  this  means  that  the 
research  which  is  needed  must  include  commercial  research. 
Business  Cycles.  One  effect  which  follows  from  the  lack 
of  planning  in  production  is  the  recurring  periods  of 
panics  and  depressions.  Every  period  may  have  its  own 
set  of  causes,  but  among  these  causes  will  surely  appear 
some  form  of  poor  adjustment  in  production.  In  fact, 
some  writers  have  explained  the  so-called  "  cycles  "  on  the 
basis  of  repeated  overproduction.  When  business  is  grow- 
ing better  and  there  comes  a  return  to  normal  conditions 
after  a  depression,  the  general  optimism  of  the  business 
man  carries  him  beyond  the  point  where  demand  will  ab- 
sorb the  supply  of  commodities.  Along  with  this  over- 
production will  appear  abnormal  credit.  When  some 
merchant  or  manufacturer  becomes  unable  to  meet  the 
demand  of  his  creditors,  those  who  have  granted  credit  to 
these  creditors  will  likewise  be  affected.  There  is,  then, 
enacted  in  business  the  old  game  of  "  tenpins  "  where  one 
knocks  the  other  over  until  they  are  all  down.  If  such  be 
the  causes  of  these  returning  cycles  of  business,  these 
panics,  crises,  and  depressions,  one  corrective  is  surely  a 
fuller  knowledge  of  business  conditions.  Once  more  this 
knowledge  lies  through  research.     The  kind  of  research 


38  COMMERCIAL  RESEARCH 

needed  is  that  which  will  determine  at  any  given  time  the 
limits  of  demand.     This  means  commercial  research. 

Maladjustment  in  Business.  Poor  adjustment  of  sup- 
ply and  demand  may  be  of  two  kinds ;  one  is  the  individual, 
and  the  other  is  the  general  lack  of  adjustment.  The 
individual  manufacturer  or  merchant  may  make  his  mis- 
takes in  location,  in  the  character  of  his  products,  or  in 
the  kind  of  business  which  he  thinks  he  can  do.  This 
means  an  individual  loss.  If  there  are  many  at  the  same 
time  who  make  such  mistakes  the  effects  are  very  naturally 
far  more  widespread.  The  losses  are  also  much  greater. 
There  may  be,  for  instance,  too  many  retail  stores  of  a 
certain  type.  Sooner  or  later  some  one  must  suffer  for 
this  mistake.  Or  an  individual  retailer  may  make  an 
error  in  judging  that  a  certain  locality  will  justify  his 
locating  there.  It  has  been  claimed  that  there  are  too 
many  retail  grocery  stores  in  most  cities.  Whether  this 
is  true  or  false  cannot  to-day  be  demonstrated.  One  may 
point  to  the  high  mortality  rate  among  the  retail  grocers, 
but  this  condition  may  be  explained  in  several  ways. 
There  is  great  risk  in  that  particular  business.  The  retail 
grocer  as  a  type  is  rarely  ever  thoroughly  trained  for  that 
particular  branch  of  business.  Both  of  these  things  may 
be  elements  in  the  explanation  of  the  large  number  of 
grocery  stores  that  go  bankrupt.  No  conclusion,  how- 
ever, can  be  valid  until  more  facts  are  known.  The  se- 
curing of  more  facts  is  the  duty  of  commercial  research. 

It  would  appear,  then,  that  a  large  part  of  the  poor 
adjustments  might  be  avoided  if  those  engaged  in  business 
knew  more  about  the  business  conditions  in  which  they 
worked.  This  would  be  true  of  the  individual  in  the  loca- 
tion of  his  store  or  of  his  factory,  and  through  the  indi- 
vidual it  would  reach  the  entire  group.     All  might  thus 


NEED  FOR  COMMERCIAL  RESEARCH       39 

be  benefited  by  the  knowledge  of  business  conditions  which 
research  would  secure,  for  it  must  be  admitted  that  lack  of 
adjustment  is  not  due  to  intention.  It  is  a  rare  instance 
where  a  man  goes  into  business  knowing  that  conditions 
are  against  him.  If  it  is  due  to  ignorance,  and  if  it  is  de- 
sirable to  rid  business  of  this  lack  of  adjustment,  then 
there  is  a  need  for  commercial  research. 

New  Business  Forces.  The  great  disturbances  in  politi- 
cal and  economic  affairs  caused  by  the  European  war  will 
also  undoubtedly  be  reflected  in  business  practices.  It  is 
the  consensus  of  opinion  that  business  in  general  is  due  to 
have  many  radical  changes.  There  will  be  new  commercial 
relations  established,  both  domestic  and  foreign.  Many 
men  are  hoping  for  a  higher  plane  of  international  busi- 
ness. Old  methods  are  fast  becoming  obsolete.  There 
will  be  need  for  new  methods  of  doing  business  to  take  their 
place.  There  is  also  likely  to  be  a  new  attitude  of  mind 
toward  business.  Many  men  are  talking  already  of  the 
profession  of  business,  but  American  business  can  never 
be  a  profession  until  there  has  been  established  a  body  of 
working  principles. 

It  is  purely  a  matter  of  prophecy  to  speak  of  the  new 
phases  of  business  which  will  result  from  the  war.  There 
is  evidence  on  every  hand  that  business  practice  may  be- 
come far  more  strenuous  than  in  the  days  that  are  gone. 
One  chief  distinction  between  American  business  methods 
and  European  business  methods  is  the  nervous  strain  of 
the  American  business  man.  He  is  restless  and  eager  and 
drives  himself  often  beyond  his  power  of  endurance.  His 
judgments  are  frequently  snap  judgments,  because  he  be- 
lieves in  quick,  direct  action.  Business  is  business  with 
him  and  personal  relationships  are  of  minor  importance. 
It  is  possible  that  there  may  be  an  interaction  between 


40  COMMERCIAL  RESEARCH 

European  methods  and  American  methods  so  that  the 
American  business  man  may  reduce  his  speed  and  the 
European  man  increase  his.  It  is  safe  to  say  at  least 
that  business  after  the  war  will  be  of  a  different  sort  from 
business  before  the  war. 

Whatever  the  changes  are  that  the  European  struggle 
brings  about,  one  thing  is  clear.  There  is  need  on  the 
part  of  the  business  man  of  a  clearer  insight  and  a  better 
knowledge  of  his  relationships.  It  is  only  by  study  and 
analysis  that  business  can  become  more  nearly  a  profes- 
sion. The  retailer  is  only  just  now  awakening  to  the  fact 
that  he  has  a  real  definite  service  to  perform  to  his  com- 
munity. In  the  past  he  has  thought  altogether  too  much 
of  what  he  could  get  without  considering  what  he  should 
give.  The  business  of  retailing  is  a  real  social  service. 
It  should  be  so  recognized  by  all  concerned  and  so  carried 
on  by  the  business  man.  A  better  understanding  of  coop- 
erative organizations  might  well  hasten  the  day  when  this 
type  of  business  would  achieve  the  success  in  the  United 
States  that  it  has  attained  elsewhere.  The  memorable 
campaign  for  free  silver  in  1896  did  much  to  awaken  busi- 
ness men  and  others  to  the  importance  of  economic  prob- 
lems; it  developed  into  a  great  national  education  move- 
ment. The  introduction  of  the  trade  acceptance  may  be- 
come another  important  educational  factor.  In  every 
way  the  new  business  will  require  more  study,  more  analy- 
sis, more  research. 

Business  Research  in  Foreign  Countries.  Changes  are 
coming  not  alone  in  the  business  of  the  United  States  but 
in  other  countries  as  well.  Great  Britain,  which  has  al- 
ways been  a  country  of  individualism,  is  now  rapidly 
changing  to  a  country  of  close  cooperation.  In  the  past 
the   British  business   man   has  had   the   responsibility   of 


NEED  FOR  COMMERCIAL  RESEARCH        41 

making  his  own  way  in  the  domestic  market  and  in  the  for- 
eign market.  He  had  to  find  his  own  buyers  and  had  to 
educate  them  to  the  buying  of  British  goods.  This  he 
did  with  great  success.  It  was  the  British  business  man 
who  made  the  pound  sterling  known  round  the  world.  It 
was  the  sound  principle  and  fair  dealing  of  this  same 
British  merchant  that  gave  the  peculiar  meaning  to  the 
expression  of  "  sterling  worth." 

To-day  British  individualism  is  being  subordinated  to 
British  cooperation.  The  great  Board  of  Trade  whic'h  in 
past  years  was  a  passive  body  has  now  grown  aggressive. 
It  has  an  active  research  department  and  an  organization 
that  reaches  out  into  the  great  markets  of  the  world.  By 
this  means  there  was,  even  in  the  midst  of  war,  a  flood  of 
information  on  trade  conditions  pouring  back  into  Eng- 
land and  it  was  being  made  available  for  the  British  manu- 
facturer and  merchant.  In  general,  British  trade  is  or- 
ganized as  it  never  was  6rganized  before,  for  both  domestic 
and  foreign  trade.  Principles  of  science  are  rapidly 
being  applied  to  business  problems.  It  will  be  a  reformed 
and  a  reorganized  British  trade  which  will  go  forward 
after  the  Avar  conquering  and  to  conquer.  This  example 
of  what  Great  Britain  is  doing  should  be  an  inspiration 
to  us. 

Long  before  the  European  conflict  Germany  had  been 
applying  scientific  analysis  to  business  problems.  There 
were  research  departments  in  factories  and  research  de- 
partments in  mercantile  establishments.  In  all  the  great 
markets  of  the  world  were  German  agents  collecting  facts 
and  sending  these  back  to  the  German  merchant  and  manu- 
facturer. Buj'ing  habits,  credit  risks,  character  of  prod- 
ucts, need  for  machinery,  personal  connections, —  all  these 
were  the  topics  of  study  and  analysis  of  the  German  busi- 


42  COMMERCIAL  RESEARCH 

ness  agent.  Everywhere  he  went  he  became  a  booster  for 
German  trade.  German  goods  were  adapted  to  foreign 
needs,  German  methods  were  adjusted  to  the  whim  and 
fancy  and  habit  of  primitive  folk. 

Even  in  the  midst  of  this  great  struggle  Germany  found 
time  to  carry  on  business  research.  In  the  iron  and  steel 
industry,  for  example,  a  special  research  institute  was 
planned  some  time  in  1917  "  to  promote  the  progress  of 
metallurgy,  with  a  view  to  the  exceedingly  keen  competi- 
tion in  the  world's  markets  to  be  anticipated  after  the 
war."  The  plans  for  this  new  research  institute  have  been 
translated  as  follows : 

"  The  preparatory  work  will  be  set  on  foot  at  once  by  the 
German  Iron  and  Steel  Institute  and  the  association  will  also 
be  afforded  subsequently  the  opportunity  of  insuring,  in  con- 
junction with  the  administrative  committee  of  the  institute 
and  a  scientific  advisory  council,  the  indispensable  cohesion 
between  the  iron  industry  and  the  new  research  institute. 

"  The  location  of  the  new  foundation  has  not  yet  been  de- 
cided upon  and  the  decision  has  been  left  to  the  German  Iron 
and  Steel  Institute.  But  according  to  the  views  expressed  in  this 
regard  at  the  preliminary  meeting  the  research  institute  will  be 
located  in  the  Rhenish-Westphalian  industrial  region.  The 
considerable  funds  required  for  the  construction  and  mainte- 
nance of  this  research  institute  will  be  provided  by  the  iron  and 
steel  industry  alone,  aside  from  a  small  contribution  from  the 
Kaiser  Wilhelm  Society,  while  the  town  in  which  the  institute  is 
established  will  have  to  undertake  to  provide,  in  addition  to  a 
subsidy  toward  tlie  building  expenses,  the  requisite  ground  for 
its  site  and  its  connection  witli  tlie  railway  by  a  siding,  etc. 
The  possibility  is  not  precluded  tliat  later  other  industries 
engaged  in  the  further  elaboration  of  iron  and  steel  may  take 
a  share  in  the  new  research  institute." — {Monetary  Times  of 
Canada,  May  10,  1918.) 

In  addition  to  this  research  institute  there  is  another 


NEED  FOR  COMMERCIAL  RESEARCH        43 

one  in  Germany  that  has  existed  since  1911-  This  society 
has  assisted  in  the  foundation  of  an  institute  for  chemical 
experiments,  coal  research,  study  of  labor  problems,  etc. 
One  of  the  principal  aims  of  the  society  was  to  promote 
foreign  trade.  With  the  coming  on  of  the  war  much  of  its 
activity  was  devoted  to  the  development  of  scientific  and 
technical  aids  to  warfare.  This,  however,  has  not  en- 
gaged all  of  its  attention.  It  still  has  had  time  to  carry 
out  work  for  the  promotion  of  industry  in  general.  As  an 
indication  of  the  program  which  this  society  has  set  for 
itself,  the  following  points  are  quoted  from  the  proceed- 
ings of  a  meeting  held  in  November,  1917: 

"  What  has  been  will  never  return ;  nor  would  it  be  de- 
sirable. Technical  science  has  been  endeavoring  to  come 
to  the  aid  of  economic  life  in  a  threefold  manner: 

1 .  By  procuring  the  raw  materials  formerly  obtained  from 
abroad,  partly  by  the  establishment  of  industries  which  had 
become  unremunerative.  (Production  of  manganese,  increase 
of  production  of  iron,  production  of  sulphur,  investigation  of 
agriculture.) 

2.  By  promoting  the  technical  tendency  alreadj'^  existing  in 
pre-war  times  toward  increased  utilization  of  waste  products. 
The  term  "  non-utilizable  substances  "  has  been  eliminated  by 
the  war. 

3.  By  producing  substitutes  such  as,  for  instance,  nitrogen 
from  air,  and  the  production  of  substance  by  synthetic 
process  where  the  natural  way  is  no  longer  available,  as  for 
instance,  the  cattle  food  produced  from  straw." 

All  of  the  business  research  work  —  technical,  indus- 
trial, financial,  commercial  —  has  now  been  concentrated 
under  the  control  of  the  Imperial  Economic  Office.  Into 
this  organization,  like  water  into  a  reservoir,  flow  business 
facts  from  the  ends  of  the  earth.     Here  are  experts  that 


44  COMMERCIAL  RESEARCH 

have  had  years  of  special  training,  to  receive,  collate,  ana- 
lyze, and  make  serviceable  these  facts.  It  is  a  bureau  of 
national  business  inquiry  for  national  business  service. 

These  are  only  instances  of  a  general  tendency  in  that 
country.  For  many  years  foreign  branch  banks  have 
been  laboratories  for  the  study  of  business  problems.  One 
great  cause  of  Germany's  remarkable  growth  in  foreign 
trade  is  undoubtedly  just  this  constant  collecting,  assem- 
bling, and  analysis  of  business  facts.  In  this  work  they 
never  grow  weary.  The  results  obtained  even  after  a 
few  years  were  such  as  to  repay  fully  all  the  painstaking 
labor  required.  Such  a  system  as  this  of  Germany  should 
be  an  example  for  us. 

Interest  in  business  research  has  awakened  in  other 
parts  of  the  world.  Japan,  for  example,  has  sent  her 
commissions  to  the  ends  of  the  earth  for  the  purpose  of 
studying  business  conditions.  The  information  thus  se- 
cured has  been  made  available  to  the  Japanese  manufac- 
turer and  merchant.  As  a  result  Japanese  goods  have 
found  their  way  into  most  of  the  great  markets  of  the 
world.  She,  too,  has  never  wearied  in  well-doing.  If  we 
are  to  meet  her  in  the  competition  of  the  future,  we  must 
be  able  to  match  her  research  work. 

France,  too,  has  been  aroused  to  the  need  for  business 
research.  She  is  growing  ambitious  to  increase  her  for- 
eign trade  and  feels  that  her  contact  with  foreign  markets 
is  all  too  tenuous.  A  plan  is  already  formulated  for  send- 
ing out  investigators  to  study  markets  and  to  send  back 
reports  on  them,  and  then  to  make  these  data  available  for 
French  manufacturer  and  mcrcliant.  The  French  con- 
sular service  is  to  be  improved  and  greatly  increased. 

The  countries  of  South  America  have  also  become  inter- 
ested in  the  study  of  trade  problems.      There  met  recently 


NEED  FOR  COMMERCIAL  RESEARCH        45 

in  the  city  of  Rio  de  Janeiro,  Brazil,  a  commercial  associa- 
tion that  took  up  the  matter  of  extending  the  commercial 
relations  of  Brazil.  As  a  result  of  this  meeting  a  com- 
mittee was  appointed  for  the  purpose  of  making  a  special 
study  to  increase  and  facilitate  commercial  relations  be- 
tween Brazil  and  England,  France,  the  United  States, 
Portugal,  and  Italy.  A  system  of  correspondence,  also, 
was  established  whereby  Chambers  of  Commerce  in  for- 
eign countries  were  asked  to  make  inquiries  about  trade 
opportunities  in  Brazil.  It  was  further  urged  that  infor- 
mation be  collected  at  once  for  the  purpose  of  intensifying 
domestic  production.  The  program  thus  analyzed  will 
be  carried  forward  by  this  commercial  association  in  its 
future  meetings.  It  is  to  become  in  a  sense  a  clearing 
house  of  business  information  for  the  manufacturers  and 
merchants  of  Brazil. 

In  Peru,  also,  there  was  recently  established  a  Commer- 
cial Information  Bureau.  The  purpose  of  this  bureau  is 
to  place  the  small  industries  of  the  country,  especially  the 
mining  and  agricultural  industries,  in  direct  communica- 
tion, both  with  the  markets  in  which  they  are  to  buy  their 
supplies  and  with  the  markets  in  which  they  arc  to  sell 
their  products.  This  bureau  is  planning  an  extensive 
library  of  trade  information.  It  is  planning  to  collect  a 
vast  number  of  periodicals  and  catalogues  from  all  parts 
of  the  world  for  the  instruction  of  their  own  business  men. 
If  the  program  is  carried  out,  it  will  become  for  that  coun- 
try an  industrial  and  commercial  research  department. 

Research  in  the  United  States.  These  are  instances  of 
the  new  movement  in  business  as  it  has  manifested  itself  in 
foreign  countries.  In  the  United  States  we  have  not  been 
wholly  inactive.  There  was  organized  in  1916  what  is 
known  as  the  National  Research  Council  under  the  aus- 


46  COMMERCIAL  RESEARCH 

pices  of  the  National  Academy  of  Sciences.     The  duties  of 
this  council  have  been  described  as  follows : 

1.  In  general,  to  stimulate  research  in  the  mathematical, 
physical,  and  biological  sciences,  and  the  application  of  these 
sciences  to  engineering,  agriculture,  medicine,  and  other  useful 
arts,  with  the  object  of  increasing  knowledge,  of  strengthening 
the  national  defense,  and  of  contributing  in  other  ways  to  the 
public  welfare. 

2.  To  survey  the  larger  possibilities  of  science,  to  formulate 
comprehensive  projects  of  research,  and  to  develop  effective 
means  of  utilizing  the  scientific  and  technical  resources  of  the 
country  for  dealing  with  tliese  projects. 

3.  To  promote  cooperation  in  research,  at  home  and  abroad, 
in  order  to  secure  concentration  of  effort,  minimize  duplication, 
and  stimulate  progress;  but  in  all  cooperative  undertakings  to 
give  encouragement  to  individual  initiative  as  fundamentally 
important  to  the  advancement  of  science. 

4.  To  serve  as  a  means  of  bringing  American  and  foreign 
investigators  into  active  cooperation  with  the  scientific  and 
technical  services  of  the  War  and  Navy  departments  and  with 
those  of  the  civil  branches  of  the  government. 

5.  To  direct  the  attention  of  scientific  and  technical  inves- 
tigators to  the  present  importance  of  military  and  industrial 
problems  in  connection  wjth  the  war,  and  to  aid  in  the  solu- 
tion of  these  problems  by  organizing  specific  researches. 

6.  To  gather  and  collate  scientific  and  technical  informa- 
tion, at  home  and  abroad,  in  cooperation  with  governmental 
and  other  agencies,  and  to  render  such  information  available  to 
duly  accredited  persons. 

In  addition  to  the  National  Research  Council  there  has 
been  organized  in  the  United  States  a  Rescarcli  Informa- 
tion Committee  whose  purpose  is  to  secure,  classify,  and 
disseminate  scientific,  technical,  and  industrial  research 
information.  At  present  this  information  is  particularly 
related  to  the  war  problems.  There  arc  branches  of  this 
committee  in  Paris  and  in  London.      There  is  no  reason 


NEED  FOR  COMMERCIAL  RESEARCH        47 

why  it  should  not  continue  in  those  centers  after  the  war 
as  a  medium  for  gathering  information  of  interest  to  the 
American  business  man.  The  chief  functions  of  these  for- 
eign committees  have  been  described  as  follows : 

(a)  The  development  of  contact  with  all  important  research 
laboratories  or  agencies,  governmental  or  private ;  the  compila- 
tion of  problems  and  subjects  under  investigation;  and  the 
collection  and  compilation  of  the  results  attained. 

(fc)  The  classification,  organization,  and  preparation  of 
such  information  for  transmission  to  the  Research  Information 
Committee  in  Washington. 

(c)  The  maintenance  of  continuous  contact  with  the  work 
of  the  offices  of  military  and  naval  attaches  in  order  that  all 
duplication  of  work  or  crossing  of  effort  may  be  avoided,  with 
the  consequent  waste  of  time  and  energy  and  the  confusion 
resulting  from  crossed  or  duplicated  effort. 

(d)  To  serve  as  an  immediate  auxiliary  to  the  offices  of  the 
military  and  naval  attaches  in  the  collection,  analysis,  and 
compilation  of  scientific,  technical,  and  industrial  research  in- 
formation. 

(e)  To  serve  as  an  agency  at  the  immediate  service  of  the 
commander  in  chief  of  the  military  or  naval  forces  in  Europe 
for  the  collection  and  analysis  of  scientific  and  technical  re- 
search information,  and  as  an  auxiliary  to  such  direct  military 
and  naval  agencies  as  may  be  in  use  for  the  purpose. 

(/)  To  serve  as  centers  of  distribution  to  the  American  Ex- 
peditionary Forces  in  France  and  to  the  American  Naval 
Forces  in  European  waters  of  scientific  and  technical  research 
information,  originating  in  the  United  States  and  transmitted 
through  the  Research  Information  Committee  in  Washington. 

(g)  To  serve  as  centers  of  distribution  to  our  allies  in 
Europe  of  scientific,  technical,  and  industrial  research  informa- 
tion originating  in  the  United  States  and  transmitted  through 
the  Research  Information  Committee  in  Washington. 

(h)  The  maintenance  of  the  necessary  contact  between  the 
offices  in  Paris  and  London  in  order  that  provision  may  be 
made  for  the  direct  and  prompt  interchange  of  important  sci- 
entific and  technical  information. 


48  COMMERCIAL  RESEARCH 

(i)  To  aid  research  workers  or  collectors  of  scientific,  tech- 
nical, and  industrial  information  from  the  United  States,  when 
properly  accredited  from  the  Research  Information  Committee 
in  Washington,  in  best  achieving  their  several  and  particular 
purposes. 

Other  machinery  has  been  set  up  for  collecting  informa- 
tion during  the  period  of  the  war.  The  War  Trade 
Board,  for  example,  is  employed  in  studying  the  problems 
connected  with  exports  and  imports.  Much  information 
has  no  doubt  been  gathered  by  this  board  which  should  be 
made  use  of  by  the  American  business  man.  The  Division 
of  Planning  and  Statistics  of  the  Shipping  Board  is  also 
making  exhaustive  investigations  into  questions  connected 
with  imports.  Data  of  this  sort  should  likewise  be  at  the 
service  of  the  American  merchant  and  manufacturer. 
There  is  also  the  Commercial  Economy  Board  that  has 
been  busy  studying  the  question  of  essential  and  non- 
essential industries  and  the  possibilities  of  making  econ- 
omies in  business  practices.  Many  suggestions  have  al- 
ready emanated  from  this  board  that  should  prove  helpful 
to  the  merchant.  There  is  no  doubt  that  the  experience 
and  information  acquired  by  this  board  will  be  very  useful 
in  the  trade  problems  that  are  to  come. 

There  is,  furthermore,  the  Federal  Trade  Commission 
with  its  group  of  experts  who  have  been  devoting  their 
time  to  the  study  of  the  most  vexing  industrial  and  com- 
mercial problems.  This  commission  has  been  urging  for 
some  time  that  a  permanent  organization  for  business  re- 
search should  be  established  in  the  United  States.  The 
policy  to  be  followed  by  this  commission  has  been  stated 
with  force  and  eloquence  by  its  recent  chairman: 

"  We  are  talking  a  great  deal  these  days  about  mobilizing 


NEED  FOR  COMMERCIAL  RESEARCH        49 

our  industries  and  cooperating  for  industrial  preparedness. 
We  have  been  floundering  about  for  many  years  with  no  defi- 
nite plan.  In  fact^  the  first  step  has  hardly  been  taken  toward 
solving  our  industrial  problems  and  achieving  those  results  in 
business  which  we  all  know  are  absolutely  necessary.  Coop- 
eration requires  the  interest  and  good  will  of  both  the  govern- 
ment and  business.  Business  men  are  anxious  to  cooperate 
with  the  government.  It  is  the  intention  of  the  Federal  Trade 
Commission,  on  behalf  of  the  government,  to  lend  its  active 
constructive  aid,  and  its  earnest  desire  to  do  everything  in  its 
power  to  help  to  foster  American  industries.  Its  work  extends 
beyond  the  mere  proceeding  against  violators  of  the  law.  It  is 
seeking  to  improve  business  conditions  in  such  a  way  as  to 
reduce  the  probability  of  violations  of  law.  As  will  be  con- 
sidered in  later  chapters,  it  has  begun  at  the  foundation  of 
business  by  encouraging  better  cost  accounting  and  other  busi- 
ness methods.  It  has  begun  to  gather  comprehensive  data  on 
industry.  It  is  using  its  great  investigative  powers  in  cooper- 
ating with  Congress  and  in  furnishing  information  which  will 
lead  to  sound  business  legislation.  It  believes  that  the  day  of 
the  negative  attitude  of  government  is  past  and  that  the  time 
has  come  when  the  government  must  take  an  interest  in  laying 
broad  and  secure  foundation  for  American  business  life." 
(E.  N.  Hurley,  "  The  Awakening  of  Business,"  pp.  167-8.) 

A  Research  Bureau.  While  the  United  States  Govern- 
ment has  a  very  extensive  organization  for  taking  care  of 
many  of  the  national  problems,  there  is  still  lacking  in  the 
judgment  of  many  business  men  complete  machinery  for 
meeting  the  needs  of  those  interested  in  business  research. 
In  order  to  fill  in  this  gap  it  has  been  proposed  that  a 
Federal  Trade  Census  Bureau  be  established,  or  that  some 
kind  of  research  institute  be  organized  for  this  special 
purpose.  The  need  for  this  new  type  of  governmental 
machinery  is  stated  in  considerable  detail  by  a  recent 
writer  on  the  subject  of  business  investigation.  If  the 
idea  is  carried  into  practice,  there  would  be  done,  then,  for 


50  COMMERCIAL  RESEARCH 

the  business  man  what  has  for  a  long  time  been  done  for 
the  farming  interests.  There  can  be  little  doubt  but  that 
the  idea  would  receive  the  indorsement  of  the  leading  busi- 
ness men  of  the  country. 

"  An  institute  is  needed  for  the  organization  of  the  collec- 
tion and  imparting  of  exact  and  reliable  knowledge  about  facts 
and  ideas.  It  is  important  that  a  means  of  communication  be 
established  between  those  who  seek  and  those  who  have  to 
impart  special  information  about  new  facts  and  ideas.  In  or- 
der to  obtain  exact  and  reliable  information  on  any  subject  it  is 
necessary  to  know  where  such  information  is  to  be  found,  and 
what  sources  of  information  are  most  reliable.  The  proposed 
institute  woidd  first  of  all  collect  information  about  available 
sources  of  information;  it  would  prepare  a  directory  of  direc- 
tories, a  catalogue  of  catalogues,  a  list  of  addresses  of  workers 
and  investigators,  a  guide  to  special  collections  of  written  and 
printed  material,  of  specimens  and  models,  as  well  as  to  the 
expert  special  knowledge  not  yet  public  property.  The  insti- 
tute would  offer  its  services  to  organize  bibliographical  and 
index  work,  much  of  which  is  now  done  by  isolated  agencies 
and  individuals,  resulting  in  duplication  and  waste  without 
making  all  the  existing  knowledge  available.  It  would  also 
undertake  research  and  index  work  that  does  not  come  within 
the  field  of  any  other  agency.  The  institute  would,  in  a  word, 
be  a  clearing  house  of  ideas  and  an  organizer  of  research. 
Many  problems  of  to-day,  that  seem  new  to  us,  are  really  not 
new  at  all;  we  often  find  in  old  books  and  magazines  im- 
portant information  about  matters  and  methods  that  were  once 
in  vogue,  but  are  now  forgotten  and  which  might  aid  in  solving 
problems  that  have  just  come  to  the  surface.  .  .  .  Every  day 
some  one  wants  to  find  out  where  certain  kinds  of  information 
may  be  found.  .  .  .  These  questions  that  press  forward  for 
solution  cannot  be  answered  by  an  isolated  institution,  how- 
ever munificently  endowed.  The  world's  knowledge  is  not  col- 
lected in  one  spot ;  it  is  scattered  all  over  the  world  and  must  be 
searched  for  all  over  the  world.  The  institute  would  therefore 
establish  close  relations  with  other  institutions  of  similar  na- 
ture in  other  countries,  and  direct  common  connections  with 


NEED  FOR  COMMERCIAL  RESEARCH        51 

the  large  libraries,  museums,  schools,  and  learned  societies  and 
institutions  of  the  world.  The  proposed  institute  would  sup- 
plement the  work  of  the  libraries  and  museums.  The  latter 
collect  and  preserve  the  materials  of  research,  catalogue  them, 
and  hold  them  available  for  investigators.  The  institute 
would  go  one  step  further,  prepare  the  material  for  use,  and 
even  indicate  its  probable  value  for  the  purpose  of  its  in- 
quirer. It  would  act  as  an  intermediary  between  the  investi- 
gators and  his  material."  (Josephson,  "  The  Dial,"  Vol.  53, 
p.  375.) 

The  ambitious  program,  thus  described,  may  at  least  in 
part  be  realized  through  some  such  organization  as  the 
Chamber  of  Commerce  of  the  United  States.  Already  this 
great  body  of  business  men  has  recognized  the  need  for  a 
research  bureau.  It  is  possible  for  them  through  their 
nation-wide  organization  to  develop  the  machinery  speed- 
ily for  a  national  service  to  business  men.  The  oppor- 
tunity for  doing  good  is  great;  the  field  is  white  already 
for  the  harvest. 

Educational  Value  of  Research.  There  is  another 
argument  for  pursuing  business  research  that  is  a  little 
more  abstract  than  the  one  which  is  based  on  the  actual 
monetary  returns  to  be  derived  from  it.  Business  in  gen- 
eral will  become  a  better  sort  of  thing  when  all  of  those 
who  are  engaged  in  it  find  it  interesting.  It  is  the  dull, 
monotonous  task  that  numbs  the  intellect  and  drains  away 
the  energy.  The  advocates  of  scientific  management  have 
urged  that  this  movement  renders  even  the  simplest  task 
interesting  and  of  educational  value.  To  the  humblest 
workman  his  routine  becomes  a  series  of  jobs  which  are  to 
be  studied.  The  spirit  of  a  game  enters  into  them.  As 
he  analyzes  them  more  fully  he  finds  them  growing  in  in- 
terest. Some  such  effect  may  be  obtained  from  commer- 
cial research  also. 


52  COMMERCIAL  RESEARCH 

It  is  now  well  recognized  by  many  merchants  that  sales 
people  become  more  efficient  as  they  know  more  about  the 
goods  they  sell.  Their  interest  is  awakened,  and  they  be- 
gin to  study  these  goods  that  they  handle  from  day  to  day. 
Then,  too,  it  has  been  found  that  sales  people  can  be 
taught  to  study  the  customers  who  enter  the  store.  They 
learn  to  observe  with  keener  insight  and  with  a  fuller 
knowledge  of  human  motives.  The  procession  of  custom- 
ers becomes  a  procession  of  interesting  individualities. 
The  day's  work  takes  on  some  of  the  aspects  of  a  moving 
picture  with  various  scenes,  amusing  and  serious,  but  all 
of  interest.  So  the  general  attitude  of  research  should 
appeal  to  individual  interest  and  should  thereby  become  of 
educational  value.  The  whole  sales  organization  may  be 
turned  into  a  veritable  corps  of  research  assistants. 

One  result  which  should  be  obtained  from  the  spirit  of 
research  is  an  increased  power  of  constructive  imagina- 
tion. A  great  deal  has  been  said  recently  in  business  cir- 
cles about  the  value  of  imagination  in  business.  It  is  un- 
doubtedly a  much  desired  quality  of  mind.  Imagination 
to  be  constructive  must  be  able  to  realize  fully  all  the 
possible  influences  in  a  given  situation.  This  ability  en- 
ables one  to  take  the  other  fellow's  point  of  view.  It  gives 
one  the  power  to  look  at  situations  impersonally.  By 
means  of  it  one  can  anticipate  human  reactions.  A  cer- 
tain retailer,  for  instance,  decided  that  he  would  give  an 
element  of  personality  to  his  store  by  a  rearrangement  of 
the  entrance.  He  constructed  a  short  passageway,  fitted 
this  with  chairs  and  a  rug,  put  some  ferns  on  a  table,  and 
added  a  few  more  homelike  touches.  He  believed  the  re- 
action of  people  who  passed  that  way  would  be  favorable 
to  his  store.  He  foresaw  an  element  of  invitation  in  this 
arrangement.      He  saw  truly.      Many  of  the  thousands  of 


NEED  FOR  COMMERCIAL  RESEARCH        53 

feet  that  might  have  passed  his  door  turned  in  because 
of  these  few  extra  items  which  gave  distinction  to  the 
entrance  to  his  store.  This  merchant  had  this  quality  of 
constructive  imagination.  He  was  able  to  anticipate  the 
effect  of  situations  upon  individuals.  What  the  rural 
merchant  did  in  his  simple  and  crude  way  can  be  done  by 
thousands  of  others  with  far  more  skill  and  cleverness. 
Nevertheless,  it  is  the  same  quality  of  mind  that  is  sought 
by  all. 

Conclusion.  This  brief  survey  of  what  is  being  done  in 
other  countries  and  in  our  own  shows  clearly  the  char- 
acter of  the  movement  underlying  the  business  of  to-mor- 
row. The  manufacturer  or  merchant  who  is  ambitious  to 
keep  abreast  of  the  most  progressive  business  practice 
must  join  in  this  movement.  It  has  been  made  clear  that 
the  fundamental  principle  of  the  new  business  is  the  prin- 
ciple of  research.  This  has  already  been  applied  with 
great  effectiveness  in  the  field  of  production.  It  is  the 
corner  stone  of  scientific  management.  But  this  is  only 
the  beginning.  The  future,  alone,  can  unfold  the  possi- 
bilities in  this  new  business  attitude.  The  point  for  every 
business  man  to  learn  is,  however,  that  he  must  know  more 
about  his  business,  both  in  detail  and  in  general.  His 
system  of  accounting  should,  of  course,  be  clear  and  ade- 
quate. There  should  also  be  some  system  for  collecting 
all  the  pertinent  and  essential  facts  bearing  upon  the  wel- 
fare of  his  business.  The  practical  business  man  needs 
more  theory.  He  needs  a  new  attitude  toward  his  prob- 
lems. The  new  attitude  should  be  one  of  research.  It 
remains  to  show  how  this  can  be  accomplished  in  the  most 
effective  manner. 


CHAPTER  III 

CHARACTER    OF    COMMERCIAL,    RESEARCH 

Spirit  of  research  —  Character  of  research  affected  by  character  of 
problem  —  Research  under  changing  conditions  —  Point  of  view  — 
Character  of  goods  —  Technological  changes  —  Research  and  com- 
mercial organization  —  Commercial  research  for  the  manufacturer  — 
Commercial  research  for  the  wholesaler  — Commercial  research  and 
the  retailer  —  Trade  and  science  —  Conclusion. 

This  new  movement  for  commercial  research  has  for  its 
ultimate  goal  a  course  of  intelligent  action.  It  may  be 
said  to  begin  with  an  attitude  of  mind.  This  is  an  at- 
titude of  thoughtfulness,  of  carefulness,  and  of  thor- 
oughness. It  is  a  desire  to  understand  the  character  of 
the  problem  which  the  business  man  faces  in  order  that 
he  may  intelligently  meet  it.  It  is  the  general  atti- 
tude of  inquiry.  The  merchant  or  manufacturer  who  is 
laying  the  foundations  of  a  permanent  business  must  con- 
stantly inquire  where  he  belongs  in  the  scheme  of  things. 
He  desires  to  know  how  the  changes  will  affect  his  own 
activities.  As  far  as  possible  he  desires  to  anticipate  all 
the  business  changes  in  order  that  his  own  activities  will 
meet  the  needs  of  to-morrow. 

Spirit  of  Research.  The  spirit  of  research  is  not  the 
spirit  of  exploitation  or  of  acquiring  sudden  wealth.  It 
is  the  attitude  of  finding  out  what  is  worth  while  doing 
and  how  it  may  best  be  done.  Economic  activity  should 
be  an  activity  of  service.  The  servant,  that  is  the  true 
servant,   must  desire   to  be  worthy   of  his  hire.     There 

54 


CHARACTER  56 

is,  therefore,  need  for  a  bit  of  practical  philosophy  in 
every  business  man.  "  One  of  the  great  and  crying  needs 
among  American  business  men  to-day  is  a  broad  view  of 
business  in  general  and  a  comprehensive  grasp  of  the 
needs  of  industry  as  a  whole.  Too  many  American  manu- 
facturers and  merchants  center  all  their  energy  and  at- 
tention upon  their  particular  establishment  and  the  work 
of  making  profits  for  it.  Men  at  the  head  of  factories 
need  a  point  of  view  of  what  might  be  termed  the  states- 
manship of  business.  They  need  to  appreciate  the  fact 
that  their  plant  is  a  part  of  a  great  industry ;  that  their 
individual  welfare  depends  very  largely  upon  the  welfare 
and  progress  of  the  industry  as  a  whole,  and  of  industry 
in  general.  Whatever  promotes  the  welfare  of  other  con- 
cerns in  industry  and  the  welfare  of  the  broad  group  of 
people  which  we  call  the  public  is  bound  to  react  favorably 
on  individual  concerns."  (Hurley's  "The  Awakening  of 
Business,"  pp.  62-63.) 

Character  of  Research  Affected  hy  Character  of  Prob- 
lem. In  general,  the  character  of  research  will  depend 
upon  the  character  of  the  problem  to  be  inquired  into.  A 
man  studies  the  railway  time-table  and  not  the  dictionary 
to  find  the  best  and  quickest  route  to  his  destination.  The 
chemist  has  his  particular  field  of  inquiry  and  his  par- 
ticular material  for  analysis.  He  must  equip  himself  in 
order  to  use  his  apparatus  and  his  materials  with  scien- 
tific accuracy.  The  student  of  physics  has  another  kind 
of  material  and  another  set  of  apparatus  with  which  to 
work.  The  psychologist  has  a  far  different  problem  and 
a  different  kind  of  apparatus.  Each  in  his  way,  how- 
ever, seeks  the  most  reliable  results  and  the  most  ele- 
mental principles  upon  which  to  base  his  conclusions. 
The  chemist  does  not  take  psychological  problems  into  his 


56  COMMERCIAL  RESEARCH 

laboratory  because  he  feels  himself  untrained  to  deal  with 
them.  The  psychologist  on  his  side  consults  the  chemist 
as  an  expert  in  his  field.  In  research  as  in  other  depart- 
ments of  human  activity  to-day,  there  is  much  specializa- 
tion. There  was  once  an  ambitious  philosopher  who  de- 
clared that  the  whole  realm  of  human  knowledge  was  his 
province.  He  is  an  ignorant  man,  indeed,  who  to-day 
gives  himself  to  such  wild  ambitions.  In  all  kinds  of  re- 
search the  beginning  of  intelligent  work  is  to  know  what 
to  exclude  from  consideration.  The  very  alphabet  of  re- 
search is  to  know  what  to  look  for,  what  to  work  with. 

In  former  times,  under  the  old  apprentice  theory,  it 
was  felt  to  be  necessary  for  a  business  man  to  know  his 
business  from  the  bottom  up.  In  order  that  he  might 
become  fully  acquainted  with  the  details  of  the  business, 
he  began  as  an  apprentice  and  worked  his  way  from  task 
to  task  until  he  reached  the  place  of  control.  It  was 
then  thought  that  he  was  fully  equipped  to  become  a  busi- 
ness manager.  This  process  was,  of  course,  slow,  the  in- 
struction was  of  the  most  informal  kind,  and  its  value  de- 
pended directly  upon  the  character  of  the  business  in 
which  the  apprentice  was  employed.  There  can  be  no 
question  but  that  such  a  course  as  this  one  has  proved 
in  many  cases  to  be  very  effective.  In  our  own  country 
it  produced  the  great  group  of  self-made  business  men  of 
whom  we  are  still  justly  proud.  It  made  the  business  man 
self-reliant  and  self-confident.  It  made  him  adaptable  to 
meet  new  and  unexpected  situations.  It  gave  him  fre- 
quently that  most  desirable  quality,  self-control.  If  he 
was  of  the  right  sort,  it  gave  him  also  a  sympathetic  un- 
derstanding of  the  employees'  point  of  view. 

The  weakness  of  the  old  apprentice  system,  however, 
is  that  it  fails  to  give  a  broad  outlook  upon  business  in 


CHARACTER  57 

general.  The  man  who  had  come  through  this  system  of 
instruction  might  know  thoroughly  a  single  business,  one 
method  of  doing  things,  but  he  was  very  likely  not  to  have 
any  basis  for  comparison  and  for  determining  what  was 
best.  It  was  out  of  this  period  that  there  came  the  say- 
ing, "  A  jack  of  all  trades,  but  master  of  none."  There 
was  an  element  of  truth  in  the  old  saying  which  we  have 
realized  in  modern  business.  The  apprentice  system  made 
for  business  tradition,  for  a  fixed  method,  for  a  business 
practice  to  be  handed  down  from  father  to  son.  There 
was  thus  a  rigidity  and  an  inflexibility  about  the  business 
system  that  made  it  incapable  of  adjusting  itself  to  chang- 
ing conditions. 

Later  there  came  the  period  of  specialization.  Under 
this  theory  a  man  was  to  devote  his  attention  to  a  very 
narrow  field,  but  within  this  field  he  was  to  become  an 
absolute  master.  It  might  be  necessary,  as  a  foundation 
work  for  such  specialized  study,  that  one  first  have  a 
broad  view  of  business.  This  was  not,  however,  always 
thought  necessary.  If  a  man  could  do  one  thing  better 
than  any  one  else  he  then  justified  his  existence.  Herein 
lay  a  great  weakness  for  the  system  of  specialized  training. 
A  man  who  could  do  only  one  thing  was  safe  so  long  as 
there  was  a  demand  for  his  services  in  that  particular  line. 
When  changing  conditions  reduced  the  demand  for  that 
particular  service,  he  then  found  himself  in  an  unfortunate 
position.  He  could  not  turn  readily  to  other  things.  He 
was  a  specialist  without  a  job.  Then  there  came  to  be  a 
fear  of  the  specialized  niche  in  business,  A  man  did  not 
want  to  become  a  mere  cog  in  a  large  machine.  It  made 
employment  too  uncertain  for  him.  Any  day  he  might  find 
his  job  gone  and  himself  unfitted  for  the  work  there  was 
to  do. 


58  COMMERCIAL  RESEARCH 

We  have  to-day  reached  the  compromise  in  these  two 
systems.  On  the  one  hand,  we  are  not  urging  wholly  to 
discard  the  apprenticeship  system  and,  on  the  other,  we 
are  not  urging  to  go  the  whole  length  with  specialization. 
In  order  to  combine  the  two  it  has  been  necessary  to 
make  the  individual  task  simpler  than  it  was  before  be- 
cause the  complexity  of  business  does  not  permit  a  man  to 
become  proficient  in  all  things.  He  must  specialize  to 
some  degree  and  specialization  means  simplifying  the 
work.  Nevertheless,  this  simplified  task  could  not  be  per- 
mitted to  become  dull  and  monotonous.  The  job,  how- 
ever simple,  must  be  interesting.  It  becomes  so  as  it  is 
related  to  the  whole.  If  the  sales  girl  at  the  ribbon  coun- 
ter feels  that  her  work,  however  simple  and  apparently 
unimportant,  is  yet  an  essential  part  of  the  entire  store 
management,  and  that  this  task  is  in  itself  a  matter  for 
thought  and  improvement  and  analysis,  she  is  likely  to 
find  her  daily  duty  far  more  interesting.  For,  after 
all,  in  business  as  in  every  other  kind  of  human  activity, 
the  task  is  interesting  as  it  is  understood.  Out  of  this 
desire  to  understand,  to  relate  the  part  to  the  whole,  has 
come  the  movement  for  research. 

It  has  been  said  that  the  beginning  of  research  is  an 
attitude  of  mind.  As  a  matter  of  fact  any  kind  of  care- 
ful analysis  smacks  somewhat  of  the  library  or  the  cloister. 
In  almost  every  kind  of  investigation  the  first  duty  is  to 
find  out  what  has  been  written  on  the  subject.  It  is  a 
waste  of  time  and  energy  to  go  through  the  process  of 
collecting  material  and  analyzing  material  which  has  al- 
ready been  collected  and  analyzed  by  some  one  else  and 
made  available  for  ready  use.  As  will  be  shown  later, 
there  is  available  to-day  a  great  mass  of  information 
which  almost  any  manufacturer  or  merchant  might  use 


CHARACTER  59 

with  excellent  results.  The  reason  why  it  has  not  been 
used  more  effectively  in  the  past  is  probably  due  to  this 
lack  of  mental  attitude,  which  here  has  been  called  the 
beginning  of  research.  While  everything  is  not  grist  that 
comes  to  the  mill,  far  more  of  the  facts  which  are  to-day 
readily  accessible  might  be  used  to  advantage  by  the 
business  man. 

Research  Under  Changing  Conditions.  Since  the  char- 
acter of  research  depends  directly  upon  the  character  of 
the  problem  studied,  it  follows  that  research  must  change 
with  changing  conditions.  Intelligent  study  can  only  rise 
from  a  clear  understanding  of  the  influences  at  work.  Re- 
search in  any  field  aims  at  the  isolation  of  modifying  fac- 
tors. A  merchant,  for  example,  may  study  as  he  will  his 
own  private  business  and  may  make  his  plans  upon  the 
basis  of  this  knowledge,  but  his  plans  may  all  go  awry 
because  he  has  not  counted  upon  the  influence  of  com- 
petition. No  business  lives  unto  itself  alone.  It  must 
adjust  itself  to  all  the  circumstances  of  the  situation. 
Furthermore,  with  the  increased  complexity  of  business, 
it  becomes  more  and  more  necessary  to  see  further  into 
the  future,  to  anticipate  the  effect  of  coming  events. 
Probably  the  most  important  element  in  commercial  re- 
search is  its  speculative  character.  What  has  happened 
is  gone  forever,  unless  it  is  made  to  be  the  basis  for  action 
to-day  and  to-morrow.  In  all  manufacturing,  for  in- 
stance, there  must  be  a  buying  of  raw  materials  before 
there  can  be  a  sale  of  finished  products,  yet  the  manu- 
facturing plans  will  depend  directly  upon  an  estimate  of 
sales.  "  What  will  the  market  be  for  my  goods  in  the 
coming  months.''"  is  the  question  to  ask  when  planning 
on  the  purchase  of  materials.  Because  research  prob- 
lems  run  back  finally   to   this   anticipation   of   consumer 


60  COMMERCIAL  RESEARCH 

demand,  a  very  large  part  of  commercial  research  has 
to  do  with  market  analysis.  Every  change  in  the  field 
of  marketing  needs  to  be  quickly  reflected  in  the  field  of 
purchasing  and  of  manufacturing. 

Point  of  View.  The  character  of  research  will  also 
change  with  the  changing  point  of  view.  The  buying  of 
raw  materials  has  one  set  of  problems.  The  sale  of  manu- 
factured goods  will  have  another.  To  the  small  rural 
retailer  the  chief  menace  may  be  competition  of  the  mail- 
order house.  From  his  point  of  view  the  increase  in 
mail-order  trade  may  seem  a  social  crisis.  To  the  con- 
sumer the  advantage  to  buy  direct  by  mail  may  appear 
to  be  an  excellent  thing.  There  is  much  sense  in  the 
old  saying  that  it  makes  all  the  difference  in  the  world 
whose  ox  is  gored.  The  principle  certainly  holds  in  all 
research  work.  A  good  example  of  this  is  found  in  the 
question  of  price  fixing.  Certain  manufacturers  claim 
that  they  have  the  right  to  fix  the  resale  price  of  their 
goods.  Certain  retailers  claim  that  they  are  deprived  of 
their  rights  if  this  power  is  given  to  the  manufacturers. 
Always  the  character  of  the  study  will  be  aff'ectcd  by  the 
immediate  interest.  It  is  true  that  this  immediate  inter- 
est may  often  be  the  cause  of  error  in  the  research  work. 

Character  of  Goods.  The  character  of  research  will 
also  change  with  changes  that  affect  the  goods  them- 
selves. If  goods  are  sold  in  bulk,  there  may  be  one  set 
of  problems  that  rise  for  analysis ;  if  goods  are  sold  in 
package  under  a  brand  name,  a  different  group  of  prob- 
lems appears.  To-day  the  manufacturer  may  be  mak- 
ing a  score  of  different  styles  of  goods  in  order  to  satisfy 
the  whims  of  his  customers.  Research  might  show  him 
by  what  means  he  could  reduce  this  number  by  one  half. 
Perishable   products    offer   one   set   of  difl'iculties;   staple 


CHARACTER  61 

commodities  may  offer  another ;  goods  that  are  sold  on 
the  basis  of  style  bring  with  them  their  attendant  troubles  ; 
goods  that  must  be  handled  by  a  number  of  dealers  at  the 
most  convenient  places  for  the  consumer  will  show  another 
group  of  questions. 

TecJnwlogical  Changes.  Trade  investigations  will  be 
modified  by  changes  in  transportation  facilities.  A  good 
example  of  this  is  the  rise  of  the  refrigerator  car.  It  is 
necessary  to-day  for  the  railroads  to  employ  a  man  who 
is  a  tcclmical  expert  in  the  subject  of  refrigeration. 
Many  business  concerns  also  that  handle  perishable  prod- 
ucts must  make  inquiry  in  this  field  of  technical  research. 
Cold-storage  warehouses  and  the  refrigerator  car  have 
revolutionized  the  meat-packing  industry  and  the  fruit 
industry.  Those  who  are  interested  in  these  products 
must  necessarily  keep  abreast  of  the  progress  made  in 
cold  storage  and  refrigeration.  It  may  be  that  these  will 
be  only  new  phases  of  old  problems,  but  market  conditions 
will  so  change  under  the  influences  of  these  changes  in 
transportation  facilities  that  the  whole  outlook  of  the 
business  man  may  become  different. 

Since  a  large  part  of  research  has  to  do  with  the  human 
element  in  business,  it  must  necessarily  involve  such  things 
as  population  movements.  These  are  generally  slow 
processes  and  the  effects  are  not  readily  discovered.  It 
may  now  be  seen,  however,  that  there  have  been  great 
changes  in  trade  organizations  due  to  the  westward  move- 
ment of  population.  Manufacturing  lias  followed  the 
course  of  this  movement.  Some  time  ago  New  York  was 
the  center  of  textile  jobbing.  To-day  only  a  few  of  the 
old  jobbing  firms  remain  in  that  trade  center.  On  the 
other  hand,  in  all  the  Middle-West  towns  of  any  consid- 
erable size  there  is  a  jobber  in  textiles.      Such  important 


62  COMMERCIAL  RESEARCH 

changes  as  this  must  be  followed  by  the  intelligent  and 
progressive  business  man.  Wood-working  trades  have 
likewise  been  compelled  to  follow  the  receding  forest  line. 
Cities  that  years  ago  had  flourishing  businesses  in  the 
wood  industry  have  found  it  necessary  to  develop  other 
enterprises  to  take  the  place  of  these. 

It  may  be  said  in  general  that  commercial  problems 
change  with  all  changes  in  industry.  While  the  principles 
of  research  in  these  problems  may  remain  constant,  the 
material  can  wholly  change.  New  conditions,  new  factors, 
new  points  of  view  will  all  modify  the  method  and  the  ma- 
terials of  research.  The  character,  therefore,  of  research 
at  any  given  time  depends  upon  the  character  of  industry 
at  that  time.  To-day  stress  may  be  laid  upon  the  me- 
chanical problems  in  a  new  machine.  To-morrow  the  em- 
phasis may  be  upon  the  selling  organization.  In  all  these 
cases  research  must  be  sufficiently  adjustable  to  meet  new 
conditions. 

Research  and  Commercial  Organization.  The  manu- 
facturer or  merchant  who  sets  about  a  study  of  his  busi- 
ness finds  himself  in  the  midst  of  an  environment  not  of  his 
own  making.  He  must  accept  conditions  as  he  finds  them 
and  adjust  himself  to  the  requirements  of  the  situation. 
To-day,  for  example,  in  the  United  States  the  type  of 
distributive  organization  is  changing.  The  middlemen  of 
yesterday  are  no  longer  accepted  as  absolutely  necessary 
in  the  scheme  of  business  organization.  New  institutions 
have  arisen  and  old  services  have  been  combined  under  a 
single  control.  If  the  business  man  is  to  know  his  busi- 
ness thoroughly,  he  must  look  abroad  upon  this  indus- 
trial and  commercial  organization  with  which  he  is  to 
deal  in  order  that  he  may  know  better  how  to  adapt  his 
methods  to  tlie  requircnicnts  of  the  situation.      He  ought 


CHARACTER  63 

to  know  something  of  the  development  of  the  distributive 
system  in  order  that  he  may  more  intelligently  judge  the 
changes  that  are  taking  place.  A  brief  descriptive  sketch 
will  here  be  given  for  the  purpose  of  indicating  this  phase 
of  the  problem.  It  will  be  understood  in  this  discussion 
that  the  character  of  business  research  will  be  modified  by 
the  character  of  the  existing  commercial  organization. 

Those  institutions,  or  departments,  which  have  to  do 
with  the  buying  and  selling  functions  in  modern  business 
make  up  the  various  parts  of  what  may  be  called  commer- 
cial organization.  It  is  clear  that  these  functions  of  buy- 
ing and  selling  belong  to  practically  every  kind  of  busi- 
ness enterprise.  The  manufacturer  buys  his  raw  ma- 
terials and  sells  his  finished  product.  The  merchant  buys 
his  stock  of  goods  and  sells  it  to  the  consumer.  The  rail- 
road buys  its  equipment  and  sells  its  services.  The  work- 
man buys  food  and  clothing  and  shelter,  and  sells  his 
energy  and  skill.  The  same  principle  applies  to  such  in- 
stitutions as  the  bank,  the  grain  exchange,  the  warehouse, 
and  all  other  types  of  business.  Buying  and  selling  are 
the  beginning  and  ending  of  any  business  undertaking. 

In  the  development  of  our  modern  business  organiza- 
tion there  has  been,  on  the  one  hand,  a  tendency  to  greater 
specialization.  New  types  of  middlemen  have  risen  to 
take  care  of  certain  functions  which  have  become  increas- 
ingly important  with  an  increase  in  the  complexity  of 
business.  There  is  to-day  a  multitude  of  what  are  called 
functional  middlemen.  There  are,  for  example,  special- 
ized jobbers,  specialized  brokers,  warehouse  men,  trans- 
portation men,  specialized  retailers,  insurance  men,  banks, 
commercial  paper  houses, —  all  of  these  having  come  into 
being  in  response  to  a  demand  for  a  peculiar  and  impor- 
tant service. 


64  COMMERCIAL  RESEARCH 

On  the  other  hand,  there  has  been  a  trend  toward  busi- 
ness consolidation,  or  business  integration.  Recent  years 
have  seen  the  rise  of  large  business  concerns  controlling 
under  one  management  many  of  the  functions  which  be- 
longed to  specialized  middlemen.  For  instance,  the  mail- 
order house  has  had  as  its  primary  purpose  the  merchant 
function.  It  had  planned  to  buy  direct  from  the  manu- 
facturer and  sell  either  in  wholesale  or  retail  lots  to  deal- 
ers or  to  consumers.  The  most  distinct  type  of  mail-order 
house  has  bought  direct  from  manufacturer  and  sold  di- 
rect to  the  consumer.  But  in  order  to  assure  itself  of 
the  quality  and  quantity  of  goods  it  wanted,  this  new 
type  of  retailer  has  often  found  it  necessary  to  take  over 
the  factory  itself.  Certain  large  jobbers,  also,  have 
reached  back  to  the  source  of  raw  material  and  now 
manufacture  many  of  their  own  goods.  Certain  manu- 
facturers have  entered  into  competition  with  the  retailer 
by  establishing  manufacturers'  branch  stores.  To-day 
on  all  hands  may  be  seen  these  two  agencies  at  work ;  one 
making  for  a  more  complex  business  organization  and 
the  other  working  toward  a  simplified  organization.  One 
of  the  first  duties  of  the  business  man  is  to  see  where  he 
stands  in  relation  to  these  two  agencies. 

But  in  all  the  intricate  organizations  of  to-day  there  is 
a  single  and  common  purpose.  That  purpose  is  to  carry 
goods  from  their  raw-material  source  to  the  consumer 
in  such  form  and  at  such  time  and  place  as  will  best  suit 
his  wants.  All  economic  activity  is  a  more  or  less  con- 
tinuous process,  in  spite  of  the  fact  that  there  are  so 
many  different  functions  and  institutions.  Business  is  a 
great  cooperative  concern  in  which  all  work  for  this  com- 
mon purpose  of  supplying  economic  goods  for  human 
wants.      No  matter  liow  keen  the  competition,  how  intense 


CHARACTER 


65 


the  feeling  between  competitors,  from  a  large  point  of 
view  all  business  men  cooperate. 

Since  the  primary  purpose  of  commercial  organization 
is  that  of  buying  and  selling,  it  may  be  said  in  general  that 
this  type  of  business  organization  stands  between  the 
producer  and  the  consumer.  This  is  true  of  raw  materials 
as  well  as  of  finished  products.  The  so-called  extractive 
industries  procure  raw  materials  from  their  various 
sources,  such  as  the  mine,  the  forest,  or  the  farm,  in  order 
to  sell  them  at  a  profit.  Between  these  producers  and  the 
manufacturing  industries  that  convert  the  raw  materials 
into  finished  products  there  has  arisen  a  complex  com- 
mercial organization.  This  organization  is  made  up  of 
commission  men,  merchants,  jobbers,  brokers,  warehouse 
men,  cold-storage  men,  owners  of  elevators,  dealers  on 
exchanges,  transportation  men,  and  many  others.  The 
manufacturer  in  purchasing  his  raw  materials  must  cope 
with  this  highly  specialized  commercial  organization. 


I 

Raw 

Materials 

II 
Extractive 
Industries 

III 
Commercial 
Organization 

IV 

Manufacturing 
Industries 

V 

Commercial 
Organization 

VI 

Consumer 
Demand 

Stages  in  the  Economic  Process. 

And  when  the  manufacturer  looks  in  the  other  direc- 
tion toward  the  consumer  market,  he  finds  that  there,  too, 
stands  another  kind  of  commercial  organization,  composed 
of  many  specialized  middlemen,  which  shuts  him  off  from 
direct  contact  with  the  consumer.  In  selling  his  finished 
products  the  manufacturer  finds  that  he  must  deal  with 


66  COMMERCIAL  RESEARCH 

this  highly  specialized  commercial  organization.  It  is 
obvious  that  he  cannot  know  his  business  with  any  great 
degree  of  thoroughness  until  he  understands  fully  his  re- 
lationships with  these  kinds  of  business  institutions. 
These  relationships  will,  of  course,  change  with  every 
change  in  the  trade  organizations  themselves.  These,  too, 
he  will  follow  carefully,  if  he  is  a  progressive  business  man. 

Types  of  commercial  organization  change  to  meet 
changes  in  industry.  The  most  important  factor  in  re- 
cent years  that  has  made  for  a  modification  of  commercial 
institutions  has  been  the  widening  of  markets  due  to  an 
increase  of  population  and  better  transportation  facili- 
ties. Entirely  new  problems  have  developed  as  the  result 
of  these  influences.  These  changes  have  had  to  do  spe- 
cifically with  (1)  the  rise  of  the  big  manufacturer;  (2) 
the  rise  of  the  big  jobber;  (3)  the  rise  of  the  new  type  of 
retailer. 

With  the  increase  in  population  has  come  an  increase 
in  purchasing  power  among  the  consumers.  This  greater 
demand  found  its  way  through  the  existing  distributive 
organization  back  to  the  manufacturer.  With  the  great 
development  in  business  it  was  inevitable  that  certain  types 
of  manufacturers,  dealers,  and  retailers  should  find  them- 
selves in  particularly  advantageous  situations.  Small 
towns  grew  rapidly  into  large  trading  centers.  Small 
manufacturers  increased  their  business  many  fold.  Job- 
bers did  likewise.  Retailers,  also,  found  their  volume  of 
business  vastly  increased.  It  was  out  of  this  situation 
that  there  arose  the  three  new  types  of  business  men  men- 
tioned above. 

When  the  manufacturer  found  his  business  of  great  vol- 
ume and  his  capital  greatly  increased  he  looked  about  him 
to  extend  his  power  of  control.     At  first  he  reached  back 


CHARACTER  67 

to  the  sources  of  raw  material  and  brought  these  under  his 
own  management.  He  could  now  be  sure  of  the  mate- 
rials for  manufacture.  He  had  thus  eliminated  the  com- 
mercial organization  which  stood  between  him  and  these 
sources.  But  he  was  still  shut  off  from  the  consumer  by 
the  distributive  system  which  handled  his  finished  products. 
In  many  cases  it  was  not  wise  for  him  to  undertake  the 
retailing  of  his  goods.  He  desired,  however,  to  control 
these  goods  as  they  came  into  the  hands  of  the  consumer. 
The  method  which  he  devised  to  accomplish  this  purpose 
was  to  brand  his  goods,  identify  them  with  himself,  and 
advertise  nationally  to  the  consumer.  In  this  way  he 
slipped  past  the  jobber  and  retailer  and  bound  the  con- 
sumer to  himself. 

In  order  to  combat  this  strategic  move  on  the  part  of 
the  manufacturer,  the  jobber  also  began  to  brand  the 
goods  which  he  handled.  He  saw  that  he  would  be  in  the 
control  of  the  manufacturer  if  he  submitted  to  the  manu- 
facturer's control  of  consumer  demand.  In  consequence 
the  jobber  advertised  his  own  branded  goods  to  the  con- 
sumer. But  in  order  to  secure  an  adequate  supply  of 
these  goods  he  often  found  it  necessary  to  take  the  entire 
output  of  a  factory,  or  to  own  and  control  the  factory 
for  himself.  Many  commodities  that  are  well  known 
throughout  the  country  to-day  are  jobbers'  brands. 
Probably  the  most  conspicuous  example  is  in  the  hard- 
ware line. 

There  came  into  this  situation  the  new  type  of  retailer 
illustrated  by  the  department  store,  the  mail-order  house, 
and  the  chain  store.  They,  also,  resented  the  appeal  by 
the  manufacturer  direct  to  the  consumer.  It  seemed  to 
them  that  if  they  permitted  this  control  by  the  manufac- 
turer of  consumer  demand,  they  would  become  mere  order 


68  COMMERCIAL  RESEARCH 

takers  and  cease  to  be  merchants.  In  order  to  combat  the 
influence  of  manufacturer  and  jobber  brands,  they  sought 
to  put  their  own  brands  on  the  goods  they  handled. 
So  to-day  there  is  a  battle  of  giants  for  the  control  of 
consumer  demand.  By  means  of  branded  goods,  by  a 
vast  amount  of  advertising,  both  nationally  and  locally, 
these  three  new  types  of  business  men  are  striving  to  con- 
trol the  expenditure  of  consumers  in  the  country. 

It  is  obvious  that  the  business  man  who  desires  to  un- 
derstand clearly  the  influences  that  aff*ect  his  business  must 
have  a  broad  view  of  these  recent  tendencies.  In  some 
way  or  other,  directly  or  indirectly,  he  will  be  influenced 
by  them.  The  best  way  in  which  to  find  out  where  he  is 
in  the  scheme  of  distribution  is  for  the  business  man  to 
study  the  development  of  the  existing  distributive  system. 
Commercial  research,  therefore,  must  include  this  phase  of 
investigation. 

Commercial  Research  for  the  Manufacturer.  It  has 
been  said  that  research  will  depend  upon  the  point  of  view 
for  its  emphasis  and  for  its  material.  If  the  investigator 
looks  at  the  problem  from  the  point  of  view  of  the  manu- 
facturer, he  will  find  that  there  are  three  more  or  less  dis- 
tinct phases.  There  is,  first,  the  problem  of  raw  materials 
which  falls  to  the  lot  of  the  purchasing  department  for 
solution.  There  is,  second,  the  field  that  has  been  largely 
preempted  by  industrial  management  experts,  which  may 
be  called  the  field  of  internal  manufacturing  problems. 
The  third  phase  is  that  of  selling  the  finished  products. 
It  is  to  be  remembered  that  for  the  manufacturer,  as  well 
as  for  other  business  men,  the  alpha  and  omega  of  his 
calculations  are  merchandising. 

A  certain  manufacturer  of  soft  drinks  had  established 
a  large  demand  for  his  goods,  had  expended  a  vast  amount 


CHARACTER  69 

of  money  in  national  advertising,  and  then  discovered  that 
the  supply  of  one  of  the  essential  ingredients  of  his  com- 
modity was  failing  him.  Disaster  seemed  to  stare  him  in 
the  face.  In  order  to  meet  the  situation  it  became  neces- 
sary to  go  to  great  expense  to  find  adequate  sources  of 
supply  of  this  particular  material.  A  single  experience 
taught  thoroughly  the  lesson  to  this  business  man,  so  that 
now  he  controls,  himself,  a  sufficient  supply  for  any  prob- 
able demand  of  his  goods.  This  instance  illustrates  the 
need  for  research  in  the  field  of  raw  materials  in  order 
that  the  business  may  be  well  controlled  and  prepared  to 
meet  the  demands  upon  it. 

A  large  planing  mill  was  established  in  a  growing  city 
in  Missouri.  Through  many  years  it  was  able  to  build 
up  a  very  excellent  business  and  had  established  itself 
firmly  in  the  minds  of  contractors  throughout  the  region. 
But  the  eyes  of  those  in  control  had  been  turned  toward 
business  getting,  leaving  the  question  of  materials  to  care 
for  itself.  Gradually  the  timber  line  receded  until  it  be- 
came a  more  and  more  expensive  matter  to  secure  the 
required  lumber  with  which  to  work.  The  management 
found  it  more  difficult  every  year  to  meet  the  competition 
of  those  who  were  located  nearer  to  the  source  of  supply. 
Business  dropped  off.  New  sources  of  lumber  were 
eagerly  sought,  but  none  could  be  found  near  at  hand. 
In  this  case  the  management  undoubtedly  had  been  short- 
sighted, for  research  would  have  shown  them  the  need  of 
assuring  themselves  of  a  continuous  supply  of  essential 
raw  materials. 

There  is  also  the  problem  of  adaptability.  Demand  for 
goods  changes  with  the  years  and  no  amount  of  advertis- 
ing will  stay  it.  Manufacturers  of  cereals  have  found  it 
necessary  to  substitute  one  material  for  another  to  meet 


70  COMMERCIAL  RESEARCH 

this  shifting  demand.  This  has  been  true  in  many  other 
kinds  of  commodities.  Research  aims  to  give  a  business 
flexibility  and  adaptabihty.  Guesswork  and  shortsighted- 
ness tend  to  fix  the  business  man  into  a  certain  rigid  sys- 
tem. In  this  case  his  plan  is  to  run  the  business  as  it 
is  rather  than  to  adjust  it  to  new  conditions.  Research 
aims  to  gather  the  material  for  intelligent  administration, 
which  means  adjustment  to  new  phases  of  demand. 

This  type  of  problem  can  be  illustrated  from  one  of  the 
examples  given  above.  The  planing  mill  that  found  its 
source  of  raw  materials  waning  was  able  to  maintain  itself 
by  changing  the  character  of  its  product.  From  indoor 
finish  which  it  formerly  furnished  for  contractors,  it 
turned  to  the  making  of  fruit  crates,  because  just  at  the 
time  of  the  failure  of  supply  of  high-grade  lumber,  those 
industries  formerly  engaged  in  making  crates  for  the  fruit 
regions  went  over  into  munitions  making.  The  manage- 
ment of  this  particular  planing  mill  was  able  to  see  the 
opportunity  for  adjustment  and  so  to  save  itself  from 
disaster. 

In  the  field  of  finished  products  the  problems  of  the 
manufacturer  are  legion.  Only  a  few  of  them  can  be  sug- 
gested here.  There  is,  for  instance,  the  question  of  new 
opportunities.  Everybody  is  looking  for  these,  of  course, 
but  he  who  has  been  trained  in  observation  is  likely  to  be 
quickest  to  see  the  opportunities.  Suggestions  may  come 
from  the  most  unexpected  sources.  One  man,  for  in- 
stance, happened  to  look  at  the  Lost  and  Found  column 
in  the  daily  paper,  and  noticed  the  great  number  of 
ladies'  pocketbooks  listed  there  as  being  lost.  His  atten- 
tion once  being  attracted  to  this  subject,  he  was  led  to 
inquire  the  reason.  It  occurred  to  him  that  it  did  not 
all  lie  in  the  carelessness  of  those  who  carried  these  pocket- 


CHARACTER  71 

books,  but  was  due  in  part,  at  least,  to  the  character  of 
the  pocketbooks  themselves.  At  that  time  there  came  to 
him  the  idea  of  making  a  pocketbook  that  would  not  be 
so  easily  lost.     Here  was  a  new  opportunity. 

There  are  those  manufacturers  who  are  discontented 
with  the  existing  distributive  system.  They  have  found  it 
too  expensive  and  too  cumbersome.  One  manufacturer 
of  typewriters,  for  instance,  has  dismissed  fifteen  thousand 
salesmen  and  agents,  has  abandoned  branch  offices  in  fifty 
cities,  and  has  undertaken  to  sell  the  machine  direct  to 
consumer  by  mail.  This  is  a  daring  adventure  and  must 
have  required  courage  on  the  part  of  the  management, 
and  yet  such  enterprise  and  independence  may  be  the  price 
of  the  highest  success.  A  manufacturer  of  wagons  also 
once  attempted  to  build  up  a  direct-by-mail  selling  sys- 
tem. He  dismissed  his  agents  in  the  various  small  towns 
throughout  the  region  where  his  product  was  sold. 
Through  advertising  he  appealed  direct  to  the  consumer. 
His  venture  was  a  failure.  Some  of  the  GO*ts  he  had  failed 
to  count.  His  critics  have  said  that  it  was  impossible  to 
sell  wagons  which  demanded  such  a  large  initial  expendi- 
ture without  salesmen.  Probably  this  manufacturer  is 
convinced  of  the  truth  of  this  criticism.  In  any  case  he 
has  returned  to  the  old  system. 

The  manufacturer  by  research  may  also  become  more 
fully  acquainted  with  his  commodities.  One  maker  of 
textiles  had  sold  to  a  retailer  for  fifteen  years  on  a  con- 
tract that  called  for  cloth  of  a  certain  percentage  of  wool. 
This  retailer,  on  the  word  of  the  manufacturer,  had  guar- 
anteed the  cloth  to  be  as  represented  to  him.  An  examina- 
tion, however,  showed  that  this  was  incorrect.  No  one 
was  more  astonished  than  the  manufacturer  himself  to 
learn  that  his  goods  were  not  as  represented.     An  inquiry 


72  COMMERCIAL  RESEARCH 

revealed  the  fact  that  some  production  manager  had 
changed  the  plans  without  notifying  tlic  manufacturer. 
Another  maker  of  textiles  has  advertised  that  he  has  se- 
cured the  written  opinion  of  thirty-six  experts  as  to  the 
best  way  to  shrink  cloth.  A  maker  of  shoes  has  declared 
that,  "  For  many  years  we  have  made  it  our  fixed  policy 
to  acquire  every  possible  bit  of  information  about  the  shoe 
industry  which  we  can  obtain  from  any  source  and  to 
record  such  information  for  ready  access.  Our  special- 
ists in  every  branch  of  the  shoe  business  have  made  a  con- 
tinual study  of  factory  methods,  manufacturing  policies, 
material,  production,  styles,  and  workmanship.  This 
knowledge  adds  remarkably  to  the  character,  quality,  and 
value  of  our  shoes.  We  test  every  new  process  or  idea 
that  promises  improvement.  The  great  volume  of  our 
business  enables  us  to  specify  that  new  ideas  shall  be 
utilized  even  where  it  requires  a  radical  change  in  the 
standard  practice  of  a  shoe  factory.  Every  slioe  we  sell 
evidences  the  wisdom  and  value  of  this  policy." 

This  brief  survey  indicates  some  of  the  problems  which 
the  manufacturer  must  solve  by  means  of  research.  There 
are,  of  course,  countless  others.  To-day  in  all  complex 
business  where  there  is  need  to  anticipate  market  demands 
as  far  as  possible,  it  becomes  more  and  more  necessary 
to  have  a  complete  knowledge  of  all  the  factors  at  work. 
The  principle  is  clear  and  definite  in  this  case :  The  more 
complete  the  knowledge,  the  less  the  risk.  As  the  manu- 
facturer increases  his  knowledge  he  becomes  more  inde- 
pendent of  the  distributive  system  that  handles  his  goods. 
He  is  more  nearly  in  a  position  to  find  direct  contact  with 
the  consumer.  It  may  be  said,  in  general,  that  the  manu- 
facturers' problems  will  have  to  do  with  one  or  the  other 
of  three  phases   of  his  business.     First,  those  problems 


CHARACTER  73 

that  have  to  do  with  the  character  of  his  goods,  and,  sec- 
ond, the  problem  of  finding  a  market,  and,  third,  the  prob- 
lem of  selecting  the  best  trade  organization. 

Commercial  Research  for  the  Wholesaler.  The  middle- 
man should  remain  as  a  part  of  business  organization 
only  so  long  as  his  service  justifies  his  existence.  If  goods 
can  be  carried  from  their  source  to  the  consumer  more 
economically  and  efficiently  without  his  intervention,  then 
the  sooner  he  is  eliminated  the  better  for  all  concerned. 
His  chief  reason  for  being  is  that  he  can  perform  a  part  of 
the  distributive  service  more  effectively  and  more  eco- 
nomically than  the  manufacturer  or  the  retailer  can  do  it 
for  himself.  The  main  functions  which  have  been  left  to 
the  middleman  in  the  wholesale  trade  are  the  assembling 
of  goods  from  many  widely  separated  small  sources  into 
large  wholesale  lots,  aid  in  financing  the  distributive  proc- 
ess, sharing  of  the  risks  in  business  while  distribution  is 
in  progress,  and  a  superior  knowledge  of  general  market 
conditions.  The  middleman  understands  well  enough  the 
importance  of  knowing  market  conditions.  Superior 
knowledge  of  this  sort  has  been  his  stock  in  trade  from  the 
beginning.  He  has  been  one  of  the  first  to  see  the  need 
of  careful  analysis,  and  also  has  entered  among  the  first 
into  the  field  of  commercial  research  with  a  definite  organ- 
ization. The  immediate  purpose  in  his  mind  has  been  to 
maintain  the  advantage  which  a  superior  knowledge  se- 
cures. In  the  long  run,  he  sees,  also,  that  his  position  in 
the  distributive  organization  demands  a  more  complete 
knowledge  of  production  and  of  market  demand  than  any 
one  else  is  able  to  obtain.  In  recent  years  he  has  felt 
an  increasing  struggle  against  forces  which  tend  to  elimi- 
nate him.  The  condition  to-day  is  such  that  he  must  now 
justify  himself  if  he  is  to  continue  a  successful  existence. 


74  COiMMERCIAL  RESEARCH 

There  is  need  that  he  ask  himself  seriously  the  question: 
"  Where  do  I  fit  into  the  scheme  of  things?  " 

In  former  times,  the  wholesaler  was  of  a  passive  char- 
acter. He  did  not  go  out  in  an  aggressive  manner  to  seek 
trade.  Business  came  to  him,  rather,  on  a  personal  basis. 
Ofttimes  the  Avholesaler  had  come  up  through  the  retail 
system  and  had  made  personal  connections  far  and  wide. 
It  was  on  the  basis  of  these  connections  tliat  he  maintained 
his  business.  Retailers  dealt  with  him  because  they  knew 
him.  Since  he  thus  controlled  the  retail  demand  the  manu- 
facturers sought  his  aid  in  distributing  tlieir  goods.  His 
position,  therefore,  was  that  of  a  mediator  between  the 
manufacturer  and  the  retailer.  From  the  former  he 
learned  of  conditions  in  the  field  of  production  and  from 
the  latter  he  gained  a  broad  knowledge  of  consumer  de- 
mand. Apart  from  the  financial  assistance  which  he  was 
able  to  give  both  to  the  manufacturer  and  to  the  retailer 
his  essential  duty  was  that  of  a  purveyor  of  knowledge. 

In  many  lines  of  business,  however,  the  passing  years 
have  brought  radical  changes.  As  we  have  pointed  out 
above,  the  manufacturer,  on  one  hand,  has  reached  past 
the  wholesaler  to  the  retailer  and  even  to  the  consumer  by 
means  of  branding  goods  and  advertising.  The  retailer, 
on  the  other  hand,  has  either  taken  over  the  wholesaler's 
functions,  or  has  reached  past  him  to  buy  directly  from 
the  manufacturer.  It  is  against  these  influences  that  the 
wholesaler  must  struggle.  Indeed,  he  is  struggling 
against  them  with  much  force  and  aggressiveness  to-day. 
There  is  an  interesting  analogy  to  this  situation  in  the 
development  of  railway  transportation.  The  great  trunk 
lines  that  reached  out  from  the  trade  centers  in  the  East, 
such  as  New  York,  Philadelphia,  and  Baltimore,  to  tap 
the  fertile  reservoir  in  the  Mississippi  Valley,  all  concen- 


CHARACTER  75 

trated  their  efforts  on  reaching  Chicago,  St.  Louis,  and 
Cincinnati.  For  these  roads  at  the  time  of  their  build- 
ing, the  cities  of  the  Middle  West  were  the  ends  of  the 
line.  The  immediate  effect  was  to  concentrate  trade  in 
these  Western  cities.  In  fact,  these  three  Middle-West 
trade  centers  easily  dominated  the  entire  region.  But 
the  day  came  when  other  railroads  found  their  way  west- 
ward to  the  Mississippi  River  without  touching  these  three 
trade  centers.  They  ran  past  Cincinnati,  past  Chicago, 
and  missed  St.  Louis,  touching  the  Mississippi  River  at 
such  places  as  Dubuque,  Hannibal,  and  Davenport.  Im- 
mediately consternation  arose  in  the  trade  centers  at 
Chicago,  St.  Louis,  and  Cincinnati.  The  trade  equili- 
brium which  had  been  established  was  overthrown.  An 
entirely  new  adjustment  had  to  be  made.  This  is  very 
much  the  situation  of  the  wholesaler  in  the  modern  sys- 
tem of  distribution.  He  is  to-day  in  the  process  of  mak- 
ing a  readjustment. 

This  period  of  transition  for  the  wholesaler  reveals  with 
great  force  the  need  for,  and  character  of,  commercial 
research.  Like  the  manufacturer,  his  problems  are  of 
many  different  sorts.  One  or  two  illustrations  will  show 
their  main  characteristics.  It  is,  for  instance,  of  vital 
importance  to  the  wholesaler  that  he  should  learn  who 
controls  at  the  moment  of  sale.  If  the  retailer  or  his 
salesman  at  the  critical  moment  of  purchase  gives  the 
deciding  voice  as  to  what  the  customer  shall  buy,  then 
the  wholesaler's  chance  is  extremely  good.  He  can  con- 
centrate his  attention  upon  the  retail  salesman.  If,  how- 
ever, the  customer  has  already  been  sold  by  means  of 
national  advertising  on  the  part  of  the  manufacturer,  and 
the  retailer  has  become  merely  an  order  taker,  then  the 
wholesaler's  task  is  more  difficult  by  far.     It  is  his  duty 


76  COMMERCIAL  RESEARCH 

to  determine  as  definitelj^  as  possible  what  influences  are 
dominant  in  the  retail  sale. 

The  character  of  the  goods  which  the  wholesaler  han- 
dles will  also  affect  the  character  of  his  research  problem. 
In  the  case  of  what  ma}'  be  called  convenience  goods,  such 
as  cereals,  food  products,  and  staple  articles  of  small 
units  of  cost,  the  manufacturer  is  desirous  of  finding  as 
many  outlets  for  his  goods  as  possible.  The  consumer 
will  buy  at  the  nearest  and  the  most  convenient  place. 
The  manufacturer  will  desire  that  his  goods  shall  be  car- 
ried in  the  largest  possible  number  of  stores  so  as  to  be 
in  that  most  convenient  place.  But  a  single  manufacturer 
cannot  well  afford  to  carry  the  thousands  of  accounts 
necessary  in  order  to  reach  all  these  small  retail  outlets. 
Here,  of  course,  is  the  chance  for  the  jobber.  His  in- 
vestigation should  reveal  the  advantages  of  his  position 
so  clearly  that  he  can  demonstrate  those  advantages  both 
to  the  manufacturer  and  the  retailer. 

Manufacturing  conditions  may  also  create  problems  for 
careful  research.  In  the  wool  industry,  for  example,  the 
factories  are  concentrated  in  a  restricted  region  in  the 
East.  Wool  is  grown  in  most  of  tlie  states  in  the  Union. 
In  the  Far  West  it  is  produced  in  large  quantities  on  the 
ranges,  in  the  Middle  West  the  "  fleece  wools  "  come  in 
small  quantities  to  the  rural  trade  centers.  Tliis  com- 
modity is  very  difficult  to  buy  because  the  question  of 
grading  is  a  hard  one.  It  requires  expert  judgment  to 
purchase  wool  in  tlie  grease  and  determine  beforehand 
its  scouring  value.  Furthermore,  the  manufacturer's  de- 
mand for  wool  depends  directly  upon  conditions  in  the 
textile  industry.  He  cannot  know  beforehand  the  amount 
of  any  grade  that  he  will  want.  He  needs,  therefore, 
ready  at  hand  a  large  storehouse  of  wool  of  all  varieties 


CHARACTER  77 

and  grades  at  all  times  of  the  year.  Here  is  a  task  for 
the  wool  jobber.  An  analysis  of  the  situation  will  show 
him  the  advantages  in  his  position.  So  long  as  condi- 
tions remain  as  they  are  to-day,  this  position  seems  se- 
cure. It  is  the  duty  of  this  jobber,  however,  to  keep  in 
instant  touch  with  all  the  changes  that  may  affect  the 
situation. 

No  group  of  business  men  has  done  more  to  organize 
the  system  for  securing  reliable  market  news  than  the 
wholesalers.  This  is  because  they  have  realized  more 
fully  than  others  the  good  strategy  of  a  superior  knowl- 
edge of  trade  conditions.  Nevertheless,  it  is  clear  that 
the  very  efficiency  of  a  market  news  system  may  tend  to 
Aveaken  the  position  of  the  wholesaler.  It  has  been 
shrewdly  remarked  that,  "  The  middleman  by  his  own 
efficiency  tends  to  eliminate  himself."  Once  the  market 
news  system  has  been  set  going  it  is  not  so  easy  for  the 
wholesaler  to  control  it.  Both  the  manufacturer  and  the 
retailer  are  very  likely  to  benefit  by  such  a  system.  So 
long  as  the  producer  and  retailer  are  in  ignorance  of  gen- 
eral trade  conditions,  just  so  long  are  they  willing  to  have 
the  wholesaler  shoulder  the  speculative  risks  in  business. 
In  a  sense  the  wholesaler  must  always  be  a  speculator, 
and  as  a  speculator  his  success  depends  upon  a  superior 
knowledge  of  market  conditions.  If  the  manufacturer 
knew  as  much  of  the  market  as  the  jobber,  there  would 
to-day  be  every  reason  for  him  to  sell  direct  to  the  retailer. 
The  broker  justifies  himself  by  a  greater  knowledge  of  the 
sources  of  materials,  and  the  demand  for  these  materials. 
The  same  argument  holds  true  for  the  commission  mer- 
chant. He  should  accept  things  on  consignment  only 
because  he  has  closer  contact  and  a  more  complete  knowl- 
edge of  the  market  than  the  producer. 


78  COMMERCIAL  RESEARCH 

It  may  be  seen,  then,  that  the  character  of  the  prob- 
lems for  the  wholesaler  varies  in  much  the  same  manner 
as  those  of  the  manufacturer.  Every  shifting  in  trade 
relationships  will  produce  new  problems.  The  very  fact 
that  the  wholesaler  is  a  middleman,  a  mediator  standing 
between  producer  and  retailer,  shows  that  he  has  to  know 
the  business  of  the  producer  as  well  as  the  business  of  the 
retailer.  There  are,  of  course,  in  addition,  his  own  indi- 
vidual problems  to  deal  with.  As  in  the  case  of  the  manu- 
facturer, the  wholesaler's  study  also,  will  be  concentrated 
upon  one  or  the  other  of  three  essentials  of  business ;  the 
character  of  the  commodities,  the  nature  of  the  market, 
and  the  character  of  the  trade  organization. 

Commercial  Research  and  the  Retailer.  A  great  deal 
of  publicity  has  been  given  in  recent  years  to  the  crude 
and  careless  methods  of  the  retail  merchants.  They  have 
not  known  their  business,  it  has  been  claimed,  even  in  its 
most  elementary  parts.  The  reason  for  this  is  generally 
attributed  to  the  fact  that  retail  business  is  the  only  "  pro- 
fession "  that  can  to-day  be  entered  without  previous 
training.  The  general  idea  is  held  that  anybody  can  be- 
come a  successful  retailer.  The  results  of  such  a  situation 
appear  in  the  high  mortality  list  of  retailers  due  to  their 
wasteful  and  slipshod  methods. 

These  criticisms  have  been  aimed  in  general  at  the  so- 
called  regular  type  of  retailer  and  not  at  the  new  type 
of  retailer,  such  as  the  department  store,  the  chain  store, 
and  the  mail-order  house.  It  is  generally  admitted  that 
these  new  retailers  are  among  the  leaders  in  merchandising. 
They  have  been  aggressive  in  their  methods  and  they  have 
appreciated  the  value  of  careful  study.  One  large  mail- 
order house,  for  example,  has  a  well-equipped  laboratory 


CHARACTER  79 

for  the  testing  of  its  goods.  Chemical  and  physical  tests 
are  made  in  order  to  see  that  the  descriptions  which  ap- 
pear in  its  catalogues  are  accurate  in  every  detail.  Ex- 
cellent systems  are  also  in  use  to  collect  and  record  in- 
valuable information  about  existing  and  prospective  cus- 
tomers. The  great  filing  systems  of  the  leading  mail- 
order houses  are  models  in  their  field.  But  even  these  new 
retailers  are  only  beginning  to  awaken  to  the  real  value  of 
careful  research. 

It  is  in  the  field  of  the  regular  retailer  that  there  is  the 
greatest  need  for  a  more  complete  knowledge  of  business 
practice.  All  those  who  have  to  deal  with  this  type  of  re- 
tailer agree  on  the  fact  that  he  must  be  more  thoroughly 
educated.  Retail  associations,  both  local  and  national, 
are  turning  their  attention  to  this  subject  of  educating 
the  retailer.  The  Wholesale  Shoe  League  has  written 
of  the  shoe  retailer  in  this  wa}' :  "  We  are  handicapped 
as  an  association  in  doing  this  work  because  the  educa- 
tional qualifications  of  a  large  majority  of  the  retailers 
of  shoes,  particularly  in  large  cities,  are  so  low  as  to  make 
it  difficult  for  them  to  adopt  many  of  the  methods  which 
have  been  otherwise  successful."  The  Federal  Trade 
Commission  has  said  that  many  of  the  retailers  in  the 
country  could  not  supply  the  commission  with  the  simplest 
facts  about  their  business.  The  president  of  an  Eastern 
grocery  association  thinks  it  is  "  simply  appalling  to  find 
so  many  men  engaged  in  one  line  who  seem  to  have  no  idea 
of  how  to  keep  any  kind  of  records  or  even  of  how  to  take 
inventory."  At  a  meeting  of  the  National  Association  of 
Credit  Men  a  report  was  presented  which  showed  that 
thirty  per  cent,  of  the  goods  sold  by  grocers  in  one  large 
city  was  sold  at  or  below  cost;  that  all  "flat  contract" 


80  COMMERCIAL  RESEARCH 

laundry  work  was  being  done  at  a  loss ;  that  a  large  part 
of  the  furniture  was  sold  throughout  the  South  at  far  less 
than  the  cost  of  doing  business. 

The  problems  of  this  type  of  retailer  are  not  by  any 
means  simple.  He,  too,  must  know  his  goods  and  his 
market.  He  must  struggle  against  the  dominating  influ- 
ence of  manufacturers'  brands  and  jobbers'  brands.  In 
fact,  he  must  answer  the  question  of  whether  he  should 
secure  brands  for  himself.  In  addition  to  this,  there  are 
the  problems  of  location,  of  store  equipment,  of  lighting, 
of  display,  or  relations  to  the  community,  of  advertising, 
of  trading  stamps,  and  countless  more.  Many  of  these 
problems  require  a  high  degree  of  skill  for  solution ;  train- 
ing of  a  high  degree  is  needed  to  achieve  success.  Here, 
more  than  almost  anywhere  else,  business  needs  to  become 
in  reality  a  profession.  It  may  be  that  the  retailer  is  not 
capable  of  meeting  all  of  these  difficulties  himself.  Pos- 
sibly a  specialized  industry  should  rise  to  analyze  his  prob- 
lems for  him.  There  are,  to-day,  the  business-research 
companies,  the  advertising  agencies,  the  various  merchan- 
dising bureaus  that  are  urging  the  retailer  to  give  them 
the  task  of  finding  a  solution  for  his  difficult  problems. 
This  service,  however,  is  an  expensive  one,  and  if  tlie  re- 
tailer can  do  it  for  himself,  the  saving  will  be  great. 
Something  of  the  character  of  his  problems  is  revealed  by 
the  illustrations  given  above. 

Trade  and  Science.  In  a  large  way  commercial  re- 
search is  applying  the  rules  of  the  known  sciences  to 
trade.  From  crude  and  simple  beginnings  modern  science 
has  developed  a  body  of  principles  to  guide  in  logical  and 
accurate  tliinking.  The  so-called  experimental  science, 
such  as  is  found  in  chemistry,  physics,  botany,  and  biology, 
developed  in  much  the  same  way  that  the  science  of  busi- 


CHARACTER  81 

ness  must  develop.  At  the  close  of  the  seventeenth  cen- 
tury men  were  still  preaching  that  the  sun  moved  around 
the  earth  and  that  the  earth  was  flat.  There  were  many 
other  philosophical  fallacies  of  that  day  that  were  equally 
great.  A  small  group  of  men  met  in  London  at  Gresham 
College  in  1662  to  study  these  various  philosophical  prob- 
lems from  the  new  point  of  view.  This  new  point  of  view 
consisted  simply  in  the  application  of  mechanical  appara- 
tus to  the  solution  of  these  vexing  problems. 

As  a  result  of  this  new  kind  of  inquiry,  there  came  into 
use  the  telescope,  the  microscope,  and  a  score  of  other 
simple  mechanical  devices  for  testing  the  accuracy  of 
these  long-held  fallacious  principles.  The  new  attitude 
also  urged  that  men  should  no  longer  accept  opinions  be- 
cause they  were  old.  Nothing  ought  to  be  believed  which 
was  not  in  accord  with  experience.  The  new  science  was, 
therefore,  called  experimental  science,  and  this  small  group 
of  men  set  about  making  experiments  with  all  sorts  and 
conditions  of  material.  Simple  and  crude  as  were  their 
methods,  the  most  astonishing  results  were  obtained.  The 
movement  of  the  earth  and  of  the  planets  was  accurately 
observed  and  mathematically  demonstrated.  Out  of  their 
efforts  grew  also  the  modern  science  of  medicine,  botany, 
physiology,  chemistr}^,  physics,  statistics,  political  econ- 
omy. The  same  principles  of  experimenting  were  applied 
to  all  these  various  lines  of  research.  Only  in  the  later 
years  of  the  past  century  were  scientific  principles  and 
discoveries  carried  over  into  trade.  Already,  however,  in 
the  field  of  production  many  of  the  natural  sciences  have 
made  great  contributions.  The  industrial  chemist,  the 
trained  geologist,  the  industrial  engineer  are  familiar  fig- 
ures to-day  in  business. 

This  is  only  the  beginning  of  the  new  kind  of  business. 


82  COMMERCIAL  RESEARCH 

Many  men  are  discovering  that  they  can  secure  great  aid 
in  the  human  relationships  in  business  through  psychology. 
Undoubtedly  in  the  years  to  come  men  will  go  much  fur- 
ther in  the  direction  of  taking  over  into  business  the  dis- 
coveries of  natural  and  social  science.  It  is  the  belief 
of  many  that  trade  itself  may  become  a  science  with  a 
definite  body  of  principles  to  be  mastered  and  to  be  ap- 
plied to  business  problems.  Surely,  the  beginning  of  such 
a  movement  lies  in  commercial  research. 

Conclusion.  No  one  doubts  to-day  that  big  problems 
loom  ahead.  These  are  of  many  different  kinds, —  polit- 
ical, social,  industrial,  and  commercial.  Of  these,  how- 
ever, the  commercial  are  not  the  least  complicated  or  least 
vital  because  they  are  fundamental.  The  beginning  of 
intelligent  action  must,  therefore,  rest  on  a  careful  and 
thoughtful  method  of  approaching  these  commercial  prob- 
lems. There  may  be  need  for  new  methods  of  control. 
If  so,  these  methods  of  control  should  be  wise  and  intelli- 
gent. They  can  be  wise  and  intelligent  onh^  if  based  upon 
thorough  and  broad  knowledge.  Intricate  and  complex 
problems  can  be  thoroughly  known  only  by  taking  them 
apart  and  isolating  the  factors  in  tliem.  This  is  the 
fundamental  duty  of  research. 

The  spirit  of  research  is  a  desire  to  know  more,  in  order 
that  one  may  act  more  intelligently.  The  true  investiga- 
tor is  he  who  is  ambitious  to  see  farthest  and  most  clearly 
the  way  that  lies  before  him.  He  is  ever  busy  to  discover 
those  broad  interrelations  of  business.  The  world,  after 
all,  is  fast  becoming  a  single  trade  unit.  For  many  goods 
already  there  is  a  world  market.  No  narrow  point  of  view 
will  suffice,  for  the  future.  Business  men  must  begin  to 
think  internationally. 

Many  people  in  many  different  lands  are  to-day  becom- 


CHARACTER  83 

ing  thoroughly  aroused  to  the  need  for  industrial  and 
commercial  research.  One  business  man  from  one  of  the 
foremost  nations  has  expressed  eloquently  and  forcibly 
his  position  on  this  subject: 

"  The  fundamental  principle  on  which  industrial  research 
rests  is  that  no  industry  can  make  progress  without  the  con- 
tinual addition  of  new  knowledge.  In  earlier  days  this  new 
knowledge  was  provided  by  the  growing  experience  of  the  in- 
dividual workers.  This,  together  with  results  of  the  efforts  of 
occasional  inventors,  ultimately  became  the  common  property 
of  the  industry.  With  tlie  increasing  complexity  of  industry 
and  more  exacting  competitive  conditions,  this  new  knowledge 
became  increasingly  difficult  to  provide,  until  farseeing  cap- 
italists appreciated  the  need  for  organizing  means  and  using 
every  facility  that  science  affords  to  provide  a  continual  influx 
of  knowledge.  These  men  at  the  same  time  appreciated  that 
sooner  or  later  every  scientific  discovery  finds  its  use  in  indus- 
try. It  is  along  such  lines  that  modern  industrial  research 
has  developed,  and  its  use  in  this  country  is  necessary  because 
it  depends  on  this  fundamental  principle,  and  not  merely 
because  other  countries  have  already  taken  advantage  of  the 
facilities  it  affords.  While  this  is  so,  some  guidance  can  be 
obtained  from  the  progress  our  competitors  have  made.  In 
Germany,  for  instance,  the  important  feature  arising  from  in- 
dustrial research  has  been  the  great  appreciation  shown  by 
manufacturers  of  the  benefits  to  be  obtained  from  the  applica- 
tion of  science,  and  the  absorption  into  their  industries  of  very 
large  numbers  of  highly  trained  technical  men.  Particularly 
have  the  benefits  of  industrial  research  been  seen  in  the  chem- 
ical and  electrical  industries.  In  the  States  an  enormous 
amount  of  industrial  research  has  been  carried  out  by  indi- 
vidual firms." —  (Ernest  J.  P.  Benn;  "  Trade  as  a  Science," 
pp.  128-9.) 

The  attitude  expressed  here  is  fast  becoming  the  atti- 
tude in  all  of  the  leading  nations.  The  business  man  who 
fails  to  grasp  the  significance  of  this  movement  is  destined 


84  COMMERCIAL  RESEARCH 

to  fall  behind  in  the  race.  He  must  understand  the  char- 
acter of  scientific  research,  and  he  must  be  eager  to  know 
his  business  more  thoroughly  in  order  that  he  may  meet 
more  successfully  and  intelligently  the  new  problems  of 
to-morrow. 


CHAPTER  IV 


SOURCES    OF    BUSINESS    FACTS 


Sales  records  —  Purchasing  records  —  Movement  of  goods  —  Bar- 
gain sales  —  Searching  the  books  —  Using  one's  sales  forces  —  Re- 
search department  —  Governmental  sources  of  business  information  — 
Merchandising  service  department  —  Trade  journals  and  associations 
—  Reference  books  —  Miscellaneous  sources  —  Conclusion. 

Commercial  research,  like  charity,  begins  at  home,  and 
the  very  first  step  which  any  manufacturer  or  merchant 
should  take  is  to  become  better  acquainted  with  his  own 
business.  There  is  at  hand  a  vast  amount  of  unused  and 
unanalyzed  material  which  might  be  put  to  a  very  good 
purpose.  Records  that  have  been  kept  for  other  uses 
will  be  found  to  throw  a  great  flood  of  light  on  conditions 
in  the  market  and  conditions  in  the  field  of  raw  materials. 
However  dead  these  records  may  be,  so  far  as  accounts 
are  concerned,  their  significance  lies  in  the  fact  that  they 
were  once  the  vital  facts  of  a  business.  The  chief  point 
to  keep  in  mind  is  that  one  should  make  the  best  use  pos- 
sible of  his  own  records. 

Sales  Records.  One  of  the  most  obvious  and  one  of  the 
most  useful  sources  of  business  facts  which  will  be  helpful 
in  commercial  analysis  is  the  record  of  sales.  Even  the 
most  elementary  system  of  bookkeeping  ought  to  show 
these  data  in  some  usable  form.  It  may  be  necessary, 
however,  for  the  future  to  keep  the  sales  accounts  in  a 
different  way  in  order  that  their  significance  may  be  more 
clearly  seen.  These  general  statements  apply  to  all  kinds 
of  business.     The  manufacturer  will  have  his  sales  rec- 

85 


86  COMMERCIAL  RESEARCH 

ords  and  from  them  will  deduce  undoubtedly  the  produc- 
tion plans  for  the  coming  period  of  three,  six,  nine,  or 
twelve  months.  The  merchant  will  have  his  sales  records 
and  will  use  them  also,  no  doubt,  in  the  formulation  of  his 
stock  buying.  Neither  manufacturer  nor  merchant  can 
administer  his  business  with  intelligence  and  foresight, 
unless  he  have  an  intimate  knowledge  of  his  record  of  sales. 

One  large  manufacturer  requires  that  his  sales  organiza- 
tion shall  furnish  him  at  the  end  of  each  six  months  a 
careful  estimate  of  the  amount  of  goods  which  can  be 
sold  during  the  coming  half  year.  These  estimates  are 
prepared  from  the  experience  and  observation  of  salesmen 
and  from  the  sales  record  during  the  past  six-month  pe- 
riod. It  is,  of  course,  necessary  for  the  sales  manager  in 
this  company  to  explain  every  change  in  the  volume  of 
sales.  These  estimates  that  are  made  at  the  semiannual 
periods  afford  a  splendid  basis  for  comparing  records  of 
the  past  and  for  estimating  the  effect  of  various  influences 
in  the  near  future.  If  a  certain  district  has  fallen  behind 
in  sales,  the  reason  for  this  decline  must  be  sought  out.  If 
in  another  district  there  has  been  a  bulge  in  the  sales,  the 
causes  of  this  also  should  be  definitely  determined. 

Certain  large  mail-order  houses  find  it  necessary  to  make 
their  plans  months  in  advance.  Large  catalogues  are 
published  every  six  months.  There  are  in  these  cata- 
logues thousands  of  articles  offered  for  sale.  How  much 
of  each  one  is  required  to  be  sold  during  the  coming  six- 
month  period,  where  an  adequate  supply  can  be  had, 
what  will  be  the  range  of  prices,  are  some  of  the  problems 
which  must  be  solved  beforehand.  In  these  concerns,  as 
in  every  other,  the  future  can  be  judged  most  accurately 
from  the  past  and  the  present.  Tlie  estimate,  therefore, 
must  finally  rest  upon  the  sales  records. 


SOURCES  OF  BUSINESS  FACTS  87 

It  is  not  the  purpose  in  this  place  to  make  a  construc- 
tive analysis  of  sales  records,  but  rather  to  indicate  some 
of  the  possibilities  for  securing  essential  facts  for  the 
intelligent  control  of  business  plans.  Sales  records  may 
be  kept  in  many  different  ways.  The  general  principle 
which  should  guide  in  their  construction  is,  of  course, 
the  purpose  for  which  they  are  to  be  used.  There  may, 
for  instance,  be  a  classification  of  sales  on  the  basis  of 
territories  or  districts.  If  the  records  have  been  kept  in 
this  way,  intelligent  use  may  be  made  of  them  for  certain 
purposes.  Records  also  may  be  based  upon  the  individual 
salesman  as  a  unit.  This  method,  also,  has  its  advan- 
tages. Or,  again,  the  unit  may  be  the  commodity  or  line 
of  goods,  or  department.  These  records,  again,  may  run 
on  the  basis  of  season,  geographical  division,  state  or  na- 
tional, or,  indeed,  on  any  other  definite  principle  that  can 
be  applied  to  such  facts. 

Even  though  the  sales  records  hav»-  not  been  kept  on 
the  basis  of  any  clear-cut  analysis,  they  may  still  afford 
reliable  and  pertinent  facts.  A  survey  of  them  should  re- 
veal, for  example,  the  best  sellers  that  are  carried.  The 
"  stickers  "  will  also  be  revealed  by  them.  There  should 
be  the  effect  of  crop  influences,  of  disaster,  such  as  flood 
or  fire  or  drought.  It  is  clear,  of  course,  that  records 
which  are  kept  without  careful  analysis  will  require  more 
labor  for  their  intelligent  interpretation  than  those  which 
have  been  analyzed  as  they  were  recorded. 

The  main  point  to  keep  in  mind  is  that  these  records 
afford  a  handy  source  of  valuable  material  which  may  be 
used  in  commercial  analysis.  It  may  be  desired  to  form 
a  different  house  policy  or  a  different  sales  plan  for  the 
future.  Possibly  the  business  manager  wants  to  set  new, 
fair  standards  for  salesmen,  or  to  determine  a  fair  bonus 


88  COMMERCIAL  RESEARCH 

on  sales.  In  all  these  cases  he  will  be  led  first  or  last 
to  his  sales  records. 

The  causes  of  sales  variations  are  of  two  general  classes ; 
those  that  are  temporary  and  those  that  are  permanent. 
A  temporary  cause  may  frequently  be  misleading  and 
result  in  too  great  optimism  or  in  too  extreme  pessimism 
in  the  plans  for  the  future.  Careful  research  will  aid  in 
escaping  both  extremes.  An  intelligent  analysis  of  sales 
records  will  mean  the  separating  of  permanent  from  tem- 
porary influences.  The  permanent  causes  of  change  are, 
of  course,  the  principal  ones  to  be  studied.  Are  these 
changes  toward  increase  or  toward  decrease  of  business.'' 
This  is  the  pertinent  question  which  the  manufacturer  and 
merchant  must  answer. 

Purchasing  Records.  There  are  also  the  purchasing 
records  which  will  often  reveal  essential  facts  for  business 
managers.  These  facts  will  have  to  do  with  sources  of 
materials,  supply  of  materials,  variations  in  price,  changes 
in  season,  quality  of  goods,  standard  tests,  and  many 
other  minor  phases  of  the  business.  It  is  well  known,  of 
course,  that  accurate  records  must  be  kept  of  purchases 
in  order  that  costs  may  be  known.  This,  too,  is  true  for 
all  kinds  of  business. 

As  in  the  sales  records,  there  are  many  different  ways 
in  which  the  purchasing  records  may  be  analyzed.  The 
character  of  the  business  and  aim  in  view  will  be  the  best 
guide  in  this  matter.  Some  general  suggestions,  however, 
will  be  made  here.  From  the  purchasing  records  more  in- 
telligent and  scientific  stock  plans  may  be  made.  A  more 
careful  estimate  of  the  amount  of  the  working  capital 
needed  in  any  given  business  may  also  be  had  from  this 
source.  There  is  the  question  of  turnover  wliich  is  a  very 
live  topic  in  these  latter  days.     This  subject  may  be  stud- 


SOURCES  OF  BUSINESS  FACTS  89 

ied  from  the  purchasing  records.  The  business  manage- 
ment ma}^  desire  to  buy  certain  goods  for  advertising  pur- 
poses. Where  such  goods  are  to  be  found,  in  what  quan- 
tity and  at  what  price  may  be  learned  from  the  purchas- 
ing records.  If  a  business  is  to  prosper,  whatever  is 
bought  must  be  sold,  and  this  means  that  the  intelligent 
buj'er  will  study  his  own  records  as  well  as  those  of  the 
sales  manager, 

A  study  of  the  purchasing  records  leads  also  into  an 
analysis  of  goods.  Very  often  the  purchasing  agent  needs 
to  be  a  highly  trained  expert.  Take,  for  illustration,  the 
case  of  wool.  He  who  buys  raw  wool  in  the  grease  must 
estimate  the  value  of  that  product  to  the  manufacturer. 
No  novice  can  do  this.  Take,  again,  the  case  of  raw  cot- 
ton. Only  in  recent  years  has  this  commodity  been  re- 
duced to  anything  approaching  scientific  standards. 
Even  in  the  case  of  wheat  there  have  been  many  different 
judgments  as  to  grades  throughout  the  United  States, 
until  the  uniform  grading  standards  were  established  by 
Federal  law.  The  effects  of  expert  knowledge  required 
of  the  purchasing  agent  should  appear  in  the  purchasing 
records. 

It  is  now  generally  accepted  that  one  of  the  most  diffi- 
cult problems  in  accounting  is  the  valuation  of  goods  or 
materials  after  they  have  been  bought.  There  begins  at 
once  a  deterioration  in  value.  Destruction  is  a  funda- 
mental law  of  nature  and  no  amount  of  repair  can  nullify 
it.  But  quite  apart  from  this  phase  of  the  question,  there 
is  much  to  be  learned  from  a  careful  analysis  of  experi- 
ences in  buying  raw  materials  and  in  buying  finished  goods. 
Certain  large  retailers,  for  example,  with  plenty  of  capital 
at  hand,  are  constantly  on  the  outlook  for  bargains. 
They  have  their  regular  sources,  they  have  their  emergency 


90  COMMERCIAL  RESEARCH 

sources,  and  they  are  free  in  the  rest  of  the  field  to  pick 
up  special  consignments  of  goods  at  a  moment's  notice. 
A  handsome  profit  is  very  often  realized  from  these  goods. 
An  analysis  of  the  purchasing  records  should  show  all 
dependable  sources,  all  emergency  sources,  and  should  give 
some  clear  idea  of  where  to  watch  for  bargains. 

Sales  records  and  purchasing  records  are  complemen- 
tary. They  should  show  both  sides  of  buying  and  selling. 
A  general  survey  of  these  two  types  of  records  ought  to 
reveal  in  a  broad  way  the  chief  outlines  of  the  buying- 
and-selling  field.  If  it  is  the  desire  of  the  business  man- 
ager to  construct  a  budget  for  the  control  of  his  busi- 
ness, he  will  need  an  analysis  of  both  of  these  records. 
As  a  matter  of  fact,  a  detailed  knowledge  of  purchase  and 
sale  is  essential  for  intelligent  control.  The  main  point 
to  be  kept  in  mind  is  that  these  sources  of  essential  facts 
are  ready  at  hand  for  the  service  of  the  business  manager. 

Movement  of  Goods.  The  business  principle  of  the  day 
is  the  largest  possible  volume  of  business  with  the  most 
frequent  possible  turnover  of  goods.  Buy  often,  is  the 
edict,  in  small  lots  and  wisely.  Take  all  discounts.  Keep 
money  at  work.  Under  keen  competition  of  the  present 
day  the  margin  of  profit  is  narrowed  to  the  point  where 
any  slight  divergence  may  bring  a  loss.  To  have  on  hand 
a  large  amount  of  goods  that  are  daily  affected  by  the 
law  of  depreciation  greatly  increases  the  risks  of  business. 
The  best  way  to  escape  these  risks  is  to  buy  in  small  lots 
and  more  frequently,  and  thus  secure  a  more  rapid  turn- 
over with  the  minimum  of  working  capital. 

There  should  be  in  every  business  a  set  of  records  that 
will  show  the  movement  of  goods  out  of  tlie  factory  or  off 
the  shelves.  Every  lot  of  goods  that  fails  to  move  with 
reasonable  rapidity  means  a  lack  of  adjustment  between 


SOURCES  OF  BUSINESS  FACTS  91 

the  demand  and  supply.  Such  a  condition  results  from 
ignorance  or  misfortune.  No  merchant  buys  goods  and 
no  manufacturer  makes  goods  unless  he  expects  to  sell 
them  at  a  profit.  One's  own  records  —  the  inventory  — 
should  give  evidence  on  the  subject  of  the  movement  of  his 
goods.  It  is  a  vital  question  and  should  interest  every 
business  manager. 

It  may  be  possible  to  ascertain  the  movement  of  goods 
from  the  purchasing  and  sales  records,  if  they  have  been 
kept  as  they  should  be  kept.  In  any  case  some  analysis 
of  these  records  is  required.  Fifty  years  ago  it  was  the 
custom  among  retailers  to  buy  once  or  twice  a  year.  This 
was  due  to  the  fact  that  the  buyer  went  to  the  central 
market,  which  was  generally  a  long  journey  and  an  ex- 
pensive one.  He  bought  his  goods  for  the  coming  half 
year  or  twelve  months.  He  took  a  chance  on  style  and 
amount  as  well  as  price.  He  expected  these  goods  to  last 
him  for  the  season  and  he  hoped  that  he  might  have  very 
few  left  at  the  end.  Under  these  circumstances  there 
was,  of  course,  a  very  great  risk  unless  the  goods  were 
very  durable  and  were  staple  products.  This  condition 
is  all  changed  to-day.  Every  retailer  has  an  oppor- 
tunity to  buy  frequently  during  the  season  and  can  quickly 
renew  any  stock  that  is  running  low.  Market  facilities 
make  it  readily  possible  to  follow  the  principle  given  above. 

Bargain  Sales.  In  connection  with  the  lack  of  adjust- 
ment between  the  supply  of  goods  on  the  shelves  or  in  the 
wareroom  and  the  demand  for  those  goods,  there  is  the 
subject  of  special  or  bargain  sales.  This  is  a  matter  that 
is  in  need  of  immediate,  careful  study.  There  has  grown 
up,  especially  in  the  retail  system,  a  regular  institution 
of  special  sales.  These  may  take  innumerable  forms,  such 
as    bargain    sales,    season-end    sales,    fire    sales,    mill-end 


92  COMMERCIAL  RESEARCH 

sales,  clearance  sales,  bankruptcy  sales,  annual  sales,  and 
scores  of  other  kinds.  So  far,  however,  very  few  busi- 
ness men  have  earnestly  sought  to  find  the  economic  prin- 
ciples upon  which  these  sales  are  based. 

Altogether  too  frequently  bargain  sales  are  a  confes- 
sion of  error  if,  indeed,  they  are  not  dishonest.  There 
can  be  but  two  valid  reasons  for  special  sales.  Both  of 
these  are  the  result  of  misfortune.  One  reason  is  that  the 
merchant  or  the  manufacturer  has  more  goods  than  he 
can  dispose  of  at  the  ruling  price,  either  on  account  of 
quantity  or  of  quality.  The  other  reason  lies  in  some 
misfortune  to  which  the  merchant  or  manufacturer  has 
been  subject.  This  latter  may  be  either  a  fire  or  some 
financial  ill  luck.  In  case  of  goods  that  have  been  dam- 
aged by  fire  or  water  or  other  accidents,  it  is  obvious  that 
if  there  is  still  value  in  them,  they  should  not  be  destroyed. 
Such  an  act  of  destruction  would  be  uneconomical.  But 
in  cases  of  this  kind  it  is  now  possible  to  share  that  risk 
of  accident  with  many  other  people,  through  some  method 
of  insurance,  so  that  the  entire  loss  will  not  fall  on  any 
given  individual.  To  cut  down  the  price  on  goods  which 
have  been  so  damaged  to  a  low  margin  which  represents 
the  best  estimate  possible  of  their  remaining  value  is  a 
sound  principle  of  business.  Special  sales  of  this  char- 
acter can  be  fully  justified. 

But  it  is  claimed  here  that  other  kinds  of  sales  cannot 
be  justified  as  a  policy.  Season-end  sales  of  style  goods 
are  a  remnant  of  an  older  system.  They  have  survived 
the  time  when  the  retailer  bought  rarely  and  in  large 
amounts.  Under  this  condition  both  the  manufacturer 
and  the  retailer  took  heavy  risks  because  of  the  uncer- 
tainty of  sales  during  the  half  year  or  twelve  months' 
period.     With  a  better  organization  of  the  market,  there 


SOURCES  OF  BUSINESS  FACTS  93 

is  to-day  no  such  risk  to  be  taken.  The  manufacturer 
can  know  his  market  more  intimately,  can  keep  in  con- 
stant touch  with  all  changes  in  the  market,  can  make  his 
manufacturing  plans  flexible  so  that  they  may  be  adjusted 
to  these  changes.  The  retailer  also  can  keep  in  close 
touch  both  with  the  market  and  with  the  manufacturers. 
Quick  delivery  and  quick  sales  lead  to  a  minimum  of  risks. 
While  the  seasons  may  remain  the  same  length  as  before, 
purchases  may  be  made  with  far  greater  frequency.  New 
styles  may  be  tried  out  before  large  purchases  are  made. 
A  much  smaller  amount  of  capital  now  is  needed  to  finance 
the  goods  for  the  season.  Under  these  circumstances, 
there  should  be  no  large  amounts  of  season-end  or  mill- 
end  goods.  In  other  words,  there  is  to-day  every  facility 
for  making  a  far  more  careful  adjustment  of  supply  to 
demand. 

Bargain  sales  as  an  established  system  must  go.  If  the 
manufacturer  or  the  merchant  desires  to  reduce  the  price 
of  his  goods  for  advertising  purposes,  let  him  face  this 
policy  frankly.  Let  him,  also,  acknowledge  that  in  buy- 
ing goods  at  the  beginning  of  the  season  with  the  conscious 
purpose  of  reducing  them  later  means  compelling  the  first 
buyers  to  pay  more  than  the  things  are  worth,  in  order 
that  the  last  buyers  may  pay  less  than  the  things  are 
worth  without  loss  to  the  seller.  It  may  be  argued,  to  be 
sure,  that  the  purchaser  is  willing  to  pay  more  because 
she  has  the  satisfaction  of  choosing  these  goods  while  they 
still  are  unique  and  distinctive.  The  gratification  of  pride 
in  this  distinction  may  be  cashed  in  on  by  the  business  man. 
Such  a  policy,  however,  is  neither  a  wise  nor  an  economic 
practice. 

It  is  clear  that  the  method  by  means  of  which  the  best 
adjustment  between  the  supply  of  goods  and  the  demand 


94  COMMERCIAL  RESEARCH 

for  goods  may  be  made  is  careful  research.  Once  again 
there  should  be  a  careful  study  of  the  records  within  the 
establishment  in  order  that  the  buying  plans  and  the  sell- 
ing plans  may  work  in  as  complete  harmony  as  possible. 
No  business  is  well  organized  until  it  is  well  balanced.  An 
accurate  adjustment  of  buying  and  selling  can  be  obtained 
only  from  a  comprehensive  study  of  past  experience  as 
revealed  in  the  records  of  the  business. 

Searching  the  Books.  There  is  a  large  clement  of 
vagueness  in  the  advice  which  says  simply  that  one  should 
study  his  own  records.  The  business  man  may  well  ask 
the  specific  questions  :  What  shall  I  look  for  in  these  rec- 
ords ;  what  are  the  significant  facts.''  These  are  the 
queries  that  need  to  be  answered  in  a  specified  manner. 
It  is  not  possible,  however,  to  state  any  general  principle 
that  will  be  specific  for  every  individual  case.  The  essen- 
tial facts  in  a  given  business  can  be  determined  onl}'  by  a 
knowledge  of  the  character  of  the  business  and  of  the  con- 
ditions under  which  it  operates.  Facts  that  are  vital  and 
essential  will  frequently  appear  under  different  guises. 
Some  simple  principles,  however,  may  be  suggested  that 
will  serve  as  a  guide  in  the  analysis  of  one's  own  records. 

Take,  for  example,  once  more  the  records  of  sales. 
Suppose  that  these  records  have  been  kept  on  the  basis  of 
territories  or  districts.  If  the  firm  is  a  large  one  and  sells 
in  large  wholesale  lots,  the  district  may  be  a  wide  area. 
If  it  is  a  retail  establishment,  a  district  may  mean  a  cer- 
tain section  of  the  city.  Within  these  areas  it  is  possible 
to  go  as  far  as  the  case  demands  in  a  general  analysis  of 
the  situation.  A  clear  idea  should  be  gained  from  these 
records  as  to  sales  fluctuations  and  reasons  for  these  fluc- 
tuations. The  large  progressive  mail-order  houses  have 
experts  who  study  crop  conditions  and  the  influences  that 


SOURCES  OF  BUSINESS  FACTS  95 

affect  the  financial  standing  of  rural  population  in  the  va- 
rious districts  throughout  the  country.  This  would  give 
them  an  idea  of  the  general  influences  that  control  these 
sections.  But  they  go  much  further  than  this.  From 
their  sales  records  they  draw  specific  data  regarding  the 
individual  purchasing.  It  is  possible  for  them  to  concen- 
trate on  a  single  card  the  name,  address,  occupation, 
whether  head  of  a  family,  the  amount  of  goods  purchased 
within  the  year,  for  every  one  who  buys  from  them  through 
the  mail.  With  very  little  difficulty  it  is  possible  for  these 
great  retail  establishments  to  identify  quickly  the  sources 
of  fluctuations  in  sales.  On  the  basis  of  this  knowledge  it 
is  likewise  possible  for  them  quickly  to  adjust  their  plans 
to  meet  new  conditions. 

The  sales  records,  as  has  been  pointed  out  above,  may  be 
analyzed  from  the  point  of  view  of  the  salesman.  It  has 
been  a  problem  for  some  time  as  to  how  to  determine  a  fair 
sales  quota  for  each  salesman.  No  doubt  much  injustice 
has  been  done  by  guesswork.  The  management  has  not 
had  sufl^cient  data  as  the  background  for  intelligent  con- 
trol in  this  matter.  Every  salesman  should,  of  course, 
stand  upon  his  own  record,  but  this  record  should  be  ana- 
lyzed with  due  regard  for  all  the  influences  that  work  upon 
the  sales  record.  Frequently  these  factors  are  intangible 
and  psychological ;  but,  nevertheless,  they  will  find  expres- 
sion in  the  books.  The  progressive  manager  will  scruti- 
nize these  accounts  for  the  purpose  of  securing  the  desired 
facts. 

The  record  of  sales  should  be  examined  also  from  an- 
other point  of  view.  This  is  the  character  of  the  goods 
sold.  It  is  well  known  that  certain  types  of  goods  prac- 
tically sell  themselves.  These  are  ordinary  staple  goods 
and  carry  a  very  narrow  margin  of  profit,  because  they 


96  COMMERCIAL  RESEARCH 

are  sure  sales.  It  does  not  require  a  high  type  of  sales- 
manship to  get  rid  of  these  goods.  There  are  other  kinds 
of  goods  which  are  poorly  adapted  to  the  market  in  which 
they  are  being  pushed.  It  is  unfair  to  judge  a  salesman 
without  a  knowledge  of  this  poor  adjustment.  The  manu- 
facturer or  the  merchant  is  first  concerned  with  the  sale  of 
goods  that  carry  the  highest  margin  of  profit.  He  wants 
the  best  effort  of  the  salesmen  concentrated  on  these  lines. 
Careful  analysis  of  the  character  of  the  goods  handled 
should  show  the  outlines  of  a  reasonable  sales  quota  under 
all  the  varying  circumstances  of  trade.  A  more  intelli- 
gent judgment  on  the  part  of  the  management  will  very 
often  secure  greater  good  will  on  the  part  of  the  salesman. 
This  is  true  for  all  kinds  of  business. 

The  object  in  this  general  discussion  has  been  to  indi- 
cate some  of  the  facts  which  now  lie  at  hand  for  every 
mianufacturer  or  merchant  in  tlie  accounts  which  he  must 
necessaril}'  keep.  He  needs  to  be  at  very  little  expense 
to  secure  these  vital  and  essential  facts.  Indeed,  they 
have  already  been  collected  in  many  cases  for  another  use. 
It  remains  only  to  adapt  them  to  the  purpose  in  hand.  If 
these  records  of  sales  and  of  purchases  are  not  kept  in  an 
intelligent  manner  then  it  is  high  time  that  some  new  prin- 
ciple be  adopted  by  the  business  manager.  It  is  a  waste 
both  of  funds  and  of  time  to  call  in  expert  aid  for  the 
purposes  of  securing  facts  which  may  be  made  readily 
available  from  one's  own  records.  Whatever  new  adjust- 
ment, therefore,  that  may  be  needed  to  make  the  sales  and 
purchase  records  intelHgcnt  for  the  control  of  a  business, 
should  be  immediately  made,  for  it  is  not  a  difficult  matter 
to  do  and  the  facts  are  of  enough  significance  to  justify 
the  change. 

Using  One's  Sales  Forces.     Another  source  of  informa- 


SOURCES  OF  BUSINESS  FACTS  97 

tion  is  also  at  hand  for  every  manufacturer  and  merchant. 
He  has  his  sales  force  which  is  in  direct  contact  with  the 
consumer  demand.  Such  a  force  is  analogous  to  the  or- 
ganization which  has  been  developed  by  the  large  grain 
brokers  and  commission  merchants  in  the  grain-trading 
centers.  These  large  grain  dealers  have  organized  a  sys- 
tem of  reports  that  cover  the  entire  productive  regions  for 
grain  throughout  the  period  of  growth  of  the  crop.  In 
all  parts  of  this  region  there  are  men  who  have  been 
trained  in  observing  the  crop  conditions.  Telegraphic  re- 
ports come  pouring  into  the  central  office  of  these  grain 
dealers  from  these  expert  observers.  The  dealers  in- 
stantly register  in  the  market  price  whatever  changes  in 
crop  prospects  they  learn  from  their  expert  investigators. 
The  most  progressive  of  these  grain  dealers  plan  to  secure 
reliable  information  far  enough  in  advance  of  all  other 
people  so  that  they  may  be  able  to  trade  intelligently  on 
the  basis  of  this  superior  knowledge.  Some  of  these  men 
get  the  crop  news  at  least  two  weeks  in  advance  of  the 
Federal  Government  report.  It  is  their  immediate  respon- 
sibility to  sec  that  these  investigators  are  well  trained  for 
their  task  and  that  their  reports  are  dependable. 

Every  manufacturer  and  merchant  that  has  a  sales 
force,  either  on  the  road  or  in  the  house,  can  use  it  as  a 
source  of  valuable  information.  A  salesman,  wherever  he 
is,  represents  the  house  that  employs  him.  If  the  policy 
of  the  house  is  as  it  should  be,  then  every  salesman  becomes 
a  f>ersonal  representative  of  the  firm  and  will  be  eager  to 
do  what  he  can  to  promote  the  interest  of  that  firm.  It 
is  to  the  interest  of  the  firm  to  gain  adequate  and  depend- 
able information  as  to  market  conditions.  In  order  that 
this  sales  organization  may  give  the  best  results  it  is  neces- 
sary that  each  salesman  should  be  trained  for  the  work. 


98  COMMERCIAL  RESEARCH 

Individuals  differ  greatly  in  their  power  of  observation 
and  in  their  ability  to  report  facts.  It  is  generally  be- 
lieved to-day  that  the  information  about  the  market,  or 
trade  conditions,  that  is  derived  from  salesmen  is  unreli- 
able. The  salesman,  it  is  said,  is  likely  to  be  biased  in  his 
opinion.  Generally  he  is  temperamental.  Many  small 
things  will  affect  his  judgment  materially.  It  is  fre- 
quently difficult  for  him  to  generalize  upon  his  experiences. 
A  more  fundamental  difficulty  is  that  when  he  is  asked  for 
information  about  the  field  which  he  himself  covers,  he  is 
asked  to  pass  judgment  upon  his  own  efforts.  No  man  is 
presumed  to  be  able  to  audit  accurately  his  own  accounts. 

In  spite  of  all  these  obstacles,  however,  the  sales  force 
may  be  trained  to  observe  accurately  and  to  report  cor- 
rectly many  essential  facts  about  market  conditions. 
There  are  firms  which  require  regular  reports  from  their 
salesmen  and  from  their  district  managers  in  regard  to 
all  changes  in  the  market  in  those  regions.  It  is  the  part 
of  the  one  who  analyzes  the  facts  that  come  in  from  this 
source  to  eliminate  from  them  the  element  of  bias  or  preju- 
dice which  they  contain.  Once  purged  of  these  elements, 
the  facts  may  be  used  without  reserve.  This  principle 
holds  true  for  traveling  salesmen  and  for  salesmen  within 
the  store.  It  is  wise  for  every  business  manager  to  give 
a  little  instruction  to  his  sales  force  in  the  matter  of  ob- 
serving types  of  people,  their  habits,  and  the  things  which 
appeal  to  them  most  and  their  reaction  to  various  appeals. 

Not  only  can  much  valuable  information  be  secured  by 
this  means,  but  the  system  also  has  a  very  considerable 
educational  value.  The  more  the  salesman  knows  about 
his  products,  the  more  he  is  likely  to  be  interested  in  them. 
The  more  he  is  interested  in  his  product,  the  more  interest- 
ing becomes  the  task  which  he  has  to  perform.     The  best 


SOURCES  OF  BUSINESS  FACTS  99 

results,  of  course,  flow  from  intelligent  interest  of  this  sort. 
Some  business  managers  have  found  it  pays  to  bring  their 
sales  people  together  for  the  general  purpose  of  creating 
interest  in  the  task  of  selling.  Sometimes  the  simplest  ele- 
mentary principles  of  psychology  are  added  to  the  general 
instruction.  This  makes  the  sales  force  interested  in  the 
prospective  customer  as  an  individual.  It  establishes  a 
new  relationship  between  the  two.  Many  desirable  results 
have  followed  from  experiments  along  this  line. 

Research  Department.  Another  source  of  information 
for  those  manufacturers  and  merchants  whose  volume  of 
business  justifies  such  specialization  is  the  research  de- 
partment. This  is  a  new  kind  of  department  in  business 
organization  that  has  multiplied  rapidly  among  the  larger 
establishments.  It  is,  of  course,  a  new  kind  of  specializa- 
tion and  can  be  justifed  only  on  the  basis  of  results  ob- 
tained. The  effort  in  this  department  is  concentrated  on 
the  collection  and  analysis  of  business  facts  connected  with 
the  particular  firm.  It  may  be  a  wholly  independent  de- 
partment or  it  may  be  subordinate  to  the  purchasing  or 
to  the  sales  department.  In  any  case  it  should  have  a 
very  large  element  of  independence  and  should  be  free  from 
any  control  that  would  tend  to  hamper  its  fair  estimate 
of  facts.  It  may  be  possible  for  the  small  manufacturer 
or  merchant  to  select  some  one  from  the  force  who  has  the 
capacity  and  training  to  interpret  business  facts.  It  may 
be  made  a  part  of  this  individual's  duty  to  examine  the 
facts  that  come  to  hand  and  to  interpret  them  in  terms  of 
business  policy. 

No  department  or  individual  in  the  business  establish- 
ment is  in  greater  need  of  cooperation  than  the  head  of  the 
research  department.  It  should  be  his  primary  duty  to 
discover  all  possible  sources  of  business  facts  within  the 


100  COMMERCIAL  RESEARCH 

establishment  and  to  secure  from  every  other  department 
whatever  service  it  can  perform  for  him.  On  the  other 
side,  it  should  be  the  duty  of  these  departments  to  help  in 
any  way  possible.  Many  business  managers  may  be 
greatly  surprised  to  find  how  many  facts  can  be  learned 
from  one's  own  business  in  this  manner.  Unexpected  data 
will  appear  from  unexpected  sources.  If  the  proper  ma- 
chinery is  set  running  to  preserve,  record,  and  analyze 
these  facts,  very  excellent  results  may  be  had.  Later  on 
will  appear  a  detailed  discussion  of  the  organization  and 
equipment  of  a  research  department. 

The  chief  aim  of  this  discussion  has  been  to  press  home 
the  fact  that  every  manufacturer  and  every  merchant  has 
at  his  command  a  business  laboratory  filled  with  material 
which  he  may  use  for  research  work.  A  little  experiment- 
ing will  quickly  show  the  possibilities  in  this  kind  of  an 
investigation.  The  main  difficulty  will  likely  be  in  inter- 
preting these  facts  into  terms  of  general,  practicable  prin- 
ciples. There  is  not  a  dearth  of  material ;  the  shortage 
is  in  the  capacity  to  use  it.  It  will  be  inexpensive  and  it 
will  fully  repay  any  effort  devoted  to  it  to  preserve,  re- 
cord, analyze,  and  interpret  the  facts  gained  from  one's 
own  business. 

Governmental  Sources  of  Business  Information.  An- 
other source  of  business  facts  which  may  prove  of  great 
value  to  any  one  interested  in  commercial  research  is  the 
reports  made  by  the  various  departments  of  the  United 
States  Government.  These  reports  may  be  had  either  on 
request  or  by  the  payment  of  a  nominal  charge.  In  the 
collection  of  such  business  data  there  is  no  control  by  any 
private  concern  or  interest,  and  every  effort  is  made  to 
eliminate  personal  bias  from  the  facts.  Many  errors,  nat- 
urally, have  crept  into  the  government   reports   for  the 


SOURCES  OF  BUSINESS  FACTS  101 

very  obvious  reasons  that  the  government  method  of  doing 
things  is  on  such  a  wholesale  plan  and  is  usually  carried  on 
by  a  great  force  of  workers  who  cannot  always  be  of  the 
proper  training  and  character.  Adequate  and  individual 
supervision  is  almost  never  possible.  Sometimes  the  sur- 
veys must  be  made  with  such  great  speed  that  an  entirely 
untrained  force  must  be  used.  In  spite  of  all  these  weak- 
nesses, the  facts  that  have  been  accumulated,  especially 
by  the  various  departments  in  their  special  reports,  are  of 
very  great  use  to  business  men.  It  is  to  be  regretted  that 
so  few  business  men  make  all  the  use  that  is  possible  of 
this  source  of  information. 

The  best  known  reports  are  probably  those  issued  by 
the  Department  of  Agriculture.  Some  of  these  come  out 
at  regular  intervals  and  are  up  to  date.  Others  are  not 
published  until  the  material  is  at  least  a  year  old.  They 
have  to  do  with  all  phases  of  farm  conditions  both  as  to 
production  and  as  to  marketing  of  farm  products.  There 
can  be  no  question  but  that  one  of  the  fundamental  factors 
in  all  kinds  of  business  is  the  condition  of  farm  crops. 
Facts  in  regard  to  the  various  crops  may  be  had  from 
the  reports  of  this  department.  There  is  issued  every 
month,  usually  on  or  about  the  eighth  day,  a  report  from 
the  Bureau  of  Statistics,  which  is  a  part  of  the  organiza- 
tion of  the  Department  of  Agriculture,  giving  the  latest 
data  concerning  the  condition  of  the  various  crops  on  the 
first  of  the  month.  These  facts  have  been  collected  from 
the  entire  productive  area  through  the  crop  experts  in 
those  regions.  They  are  very  carefully  guarded  until 
they  are  put  on  the  telegraph  wire  and  are  open  for 
everybody  in  the  United  States.  By  this  method  no  indi- 
vidual is  permitted  to  take  advantage  of  the  crop  news 
secured  by  an  organization  that  covers  the  entire  United 


102  COMMERCIAL  RESEARCH 

States.  Every  business  man  should,  of  course,  keep  in 
touch  with  the  information  from  this  bureau.  A  large 
sum  of  money  is  annually  expended  in  securing  it  and 
there  is  no  reason  why  it  should  not  be  used  to  its  fullest 
extent.  No  single  firm  can  afford  to  pay  $225,000  every 
year  in  order  to  secure  this  information,  but  every  firm 
can  readily  take  advantage  of  this  governmental  expendi- 
ture and  interpret  the  facts  in  the  terms  of  his  own  busi- 
ness. 

Another  important  factor  in  business  of  every  sort  is 
weather.  A  late,  cold  spring  or  a  hot,  dry  summer  or  an 
early  frost  may  mean  profit  or  loss  to  thousands  of  busi- 
ness men.  It  is  possible,  frequently,  also,  to  guard  one- 
self against  unseasonable  weather  if  its  approach  is  known 
in  time.  Here,  again,  the  Department  of  Agriculture  can 
be  of  great  assistance.  There  are  sent  out  daily  reports 
of  weather  conditions  throughout  the  United  States. 
Warnings  are  also  issued  from  the  various  weather  bu- 
reaus before  the  changes  in  weather  conditions.  Every 
up-to-date  business  man  should  make  all  possible  use  of 
this  material  which  is  at  hand. 

Another  part  of  the  government  service  that  may  be  of 
great  benefit  to  business  men  is  the  Bureau  of  Markets  and 
Rural  Organization.  The  main  purpose  in  the  establish- 
ment of  this  bureau  was  to  study  the  marketing  problems 
connected  with  farm  products.  A  great  deal  of  attention 
has  also  been  devoted  to  cooperative  organizations.  The 
results  of  investigations  made  in  various  parts  of  the  coun- 
try by  the  experts  in  this  bureau  have  been  published  and 
may  be  had  by  any  one  who  is  interested.  These  reports 
frequently  contain  conclusions  of  the  utmost  importance 
for  the  business  man.  He  should  know  of  these  reports 
and  should  make  whatever  use  of  them  he  may. 


SOURCES  OF  BUSINESS  FACTS  103 

There  is  also  the  Department  of  Commerce  whose  main 
duty  is,  of  course,  to  assist  the  man  in  business  in  every 
way  possible.  This  department  has  published  many  bul- 
letins which  are  of  very  great  importance  to  business  men. 
Recently  studies  were  made  of  the  costs  of  manufacture 
in  several  different  textiles.  These  bulletins  also  contain 
a  critical  examination  of  the  selling  methods  used  to  mar- 
ket these  textiles.  Information  of  this  character  and  con- 
clusions drawn  from  the  mass  of  data  assembled  by  these 
investigators  should  be  used  by  every  business  man  whose 
problems  are  in  any  way  related  to  those  of  textiles. 
There  is  a  series  of  bulletins  called  "  The  Special  Agent 
Series,"  which  deal  very  largely  with  questions  of  foreign 
trade  but  bear,  also,  upon  domestic  phases.  Some  of 
these  pamphlets  might  be  of  great  assistance  to  business 
men.  Under  the  Department  of  Commerce  there  is  the 
Bureau  of  Foreign  and  Domestic  Commerce.  Many  re- 
ports have  been  issued  by  this  bureau  bearing  upon  vari- 
ous phases  of  foreign  and  domestic  business  problems. 
Any  one  of  these  pamphlets  may  be  had  for  a  very  small 
price  and  most  of  them  are  well  worth  careful  examina- 
tion. 

Another  department  of  the  Federal  Government  which 
should  afford  very  valuable  service  to  the  business  man  is 
the  Federal  Trade  Commission.  The  primary  purpose  of 
this  commission  is  to  investigate  cases  of  unfair  methods 
of  competition.  They  have,  however,  a  far  broader  out- 
look than  this  would  indicate.  Their  work  has  led  them 
into  numerous  investigations  and  the  facts  they  have  ac- 
cumulated have,  in  a  part,  been  published.  These  facts 
are  available  for  any  business  man  who  wants  them.  The 
commission  has  been  anxious  to  serve  the  business  men  of 
the  country  to  the  best  of  their  ability.     Members  of  the 


104  COMMERCIAL  RESEARCH 

commission  have  been  chosen,  in  part,  from  those  who  have 
made  a  success  in  certain  lines  of  business  endeavor.  The 
commission's  aggressive  policy  has  already  made  itself  felt 
in  many  business  circles.  One  phase  of  it  is  well  known 
to-day;  that  is  the  effort  to  establish  standard  systems  of 
accounting.  As  outlined  by  the  recent  chairmen  of  the 
commission,  the  activities  are  to  be  directed  along  three 
different  lines.  The  first  is  to  standardize  the  methods  of 
keeping  accounts ;  the  second  is  to  secure  a  greater  degree 
of  organization  and  afford  greater  helpfulness  in  all  lines 
of  trade,  especially  through  the  machinery  of  trade  associ- 
ations, and  the  third,  to  encourage  foreign  trade,  (E.  N. 
Hurley,  "  The  Government's  Plan  to  Help  Non-Paying 
Industries  Succeed,"  Printer's  Ink,  December  9,  1915,  p. 
97.)  No  business  man  can  afford  to  reject  the  generous 
offer  of  cooperation  made  by  this  commission.  Certainly, 
the  progressive  business  man  will  keep  in  touch  with  the 
publications  of  this  commission  and  will  gain  added  infor- 
mation by  addressing  the  commission  directly. 

The  Department  of  Labor,  which  was  formerly  con- 
nected with  the  Department  of  Commerce,  has  also  issued 
many  bulletins  which  contain  valuable  business  facts,  par- 
ticularly those  that  have  to  do  with  wholesale  and  retail 
prices.  A  splendid  survey  of  the  prices  of  various  com- 
modities in  the  large  markets  of  the  United  States  will 
be  found  in  the  bulletins  of  this  department  tliat  are  issued 
from  time  to  time.  These  bulletins  contain  also  a  com- 
prehensive anal3^sis  of  business  conditions  that  should 
prove  helpful.  A  careful  examination  of  these  reports 
will  repay  all  effort  required. 

There  are  several  other  departments  whose  work  may  be 
of  service  to  the  business  man.  There  is,  for  example,  the 
United  States  Geological  Survey  whose  bulletins  contain 


SOURCES  OF  BUSINESS  FACTS  105 

the  most  authoritative  facts  on  sources  of  raw  materials. 
There  is  the  Bureau  of  Mines  that  has  been  very  active  in 
investigations  and  has  published  its  findings  from  time  to 
time.  The  Bureau  of  Standards,  also,  has  published  the 
results  of  its  work,  some  of  which  is  of  extreme  importance. 
The  Tariff  Board  is  amassing  a  vast  quantity  of  reliable 
data.  All  the  departments  of  tlie  Federal  Government  are 
interested  in  various  phases  of  industrial  and  social  life. 
The  problems  of  the  business  man  arc  frequently  treated 
by  experienced  experts,  and  material  is  collected  and 
analyzed  in  a  way  that  the  single  business  firm  could  not 
possibly  do. 

Probably  the  Census  reports  contain  the  greatest 
amount  of  information  of  direct  service  to  all  those  who 
are  interested  in  the  question  of  commercial  research. 
With  all  their  errors,  and  they  are  many,  these  reports  are 
invaluable.  In  some  cases,  the  area  covered  by  them  is  so 
large  and  the  errors  of  such  kind  that  they  probably  neu- 
tralize one  another,  so  that  the  final  results  are  not  very 
far  from  the  truth.  Many  of  our  greatest  industries  are 
discussed  in  these  reports  in  minute  detail.  The  amount 
of  business  done,  growth  and  development  of  manufac- 
turing, methods  of  sale,  value  of  goods,  and  thousands  of 
other  topics  are  taken  up  in  these  reports.  They  should 
be  of  much  greater  service  to  the  business  man  who  is 
interested  in  research  than  the}^  have  been  heretofore. 
Unless  the  plans  now  in  mind  fail,  the  reports  of  the  future 
will  contain  much  more  information  on  commercial  sub- 
jects than  has  been  the  case  in  the  past.  If  this  is  true, 
the  Census  reports  will  have  more  vital  interest  to  the 
general  business  man. 

Merchandising  Service  Departments.  A  new  kind  of 
department    has     appeared    in    many    large    businesses 


106  COMMERCIAL  RESEARCH 

throughout  the  United  States.  The  origin  of  this  new 
work  has  been  a  realization  of  the  fact  that  the  individual 
business  man  needed  a  larger  outlook  than  he  was  able  to 
secure  for  himself.  It  was  thought,  therefore,  to  be  an 
excellent  source  of  good  will  if  this  wider  opportunity 
could  be  offered  without  charge.  In  consequence,  there 
has  arisen  what  is  called  to-day  the  merchandising  service 
department. 

Many  large  banks,  for  example,  have  established  these 
departments.  The  National  City  Bank  of  New  York  has 
a  corps  of  workers  whose  duty  it  is  to  make  careful  re- 
search into  the  industrial  and  commercial  problems  con- 
nected with  many  commodities.  These  discussions  are 
generally  on  timely  topics  which  the  business  men  are 
anxious  to  understand  more  fully.  The  Guaranty  Trust 
Company  of  New  York  docs  the  same  kind  of  service. 
From  time  to  time  very  valuable  reports  are  sent  out  from 
this  bank  that  are  the  result  of  careful  research  into  live 
problems  of  business.  The  same  is  true  of  the  Irving 
National  Bank  and  the  National  Bank  of  Commerce  in 
New  York.  The  banker  is  in  a  peculiarly  advantageous 
position  in  regard  to  this  service.  It  is  not,  of  course,  to 
be  assumed  that  he  does  it  with  any  philanthropic  motive. 
He  knows  full  well  that  if  he  docs  tliis  work  acceptably 
he  will  receive  in  return  sufficient  good  will  and  patronage 
to  repay  him  for  his  expenditures.  At  the  same  time  he 
himself  becomes  more  conversant  with  trade  conditions. 
Since  he  must  serve  as  guide,  philosopher,  and  friend  to  so 
many  'business  managers,  he  feels  keenly  the  need  of  this 
knowledge.  It  helps  also  directly  in  his  business.  Credit 
conditions  reflect  at  once  trade  conditions,  and  he  must 
have  up-to-the-minute  knowledge  of  these  matters. 

There  have  appeared  recently,  for  example,  some  care- 


SOURCES  OF  BUSINESS  FACTS  107 

fully  written  pamphlets  having  to  do  with  the  use  of  trade 
acceptances,  problems  connected  with  marketing  of  cotton, 
tobacco,  and  various  other  commodities.  The  banks 
which  made  these  investigations,  no  doubt,  have  many  men 
among  their  patrons  whose  business  depends  directly  upon 
these  great  staple  commodities.  It  is  well  for  the  banker, 
as  well  as  for  the  business  man,  to  know  how  things  are 
going  in  these  industries  in  order  that  they  may  both  plan 
for  the  future  more  intelligently. 

There  are  many  firms  who  make  it  their  special  business 
to  offer  services  of  this  kind.  Nearly  all  the  brokerage 
firms  of  consequence  have  an  organization  for  collecting 
facts,  such  as  no  individual  business  man  can  afford.  The 
grain  brokers,  for  example,  in  the  large  market  centers, 
are  constantly  in  touch  with  experts  throughout  the  pro- 
dujction  region  and  are  advised  by  wire  of  every  significant 
change.  These  brokers  will,  therefore,  know  before  the 
business  man  can  learn  what  the  effect  will  be  of  the  change 
in  the  grain  crops  of  the  country.  These  men,  how- 
ever, offer  the  facts  which  they  gain  in  this  manner  quite 
freely  to  the  public.  It  is  their  primary  business  func- 
tion to  make  the  most  for  themselves  out  of  this  superior 
knowledge.  Nevertheless,  they  are  generous  in  giving  out 
the  facts  which  they  have  gleaned.  Every  market  center 
of  staples  has  this  type  of  dealer.  It  is  true  of  cotton  and 
wool.  And,  of  course,  it  is  well  known  that  buyers  and 
sellers  of  stocks  and  bonds  accumulate  a  vast  amount  of 
material  of  this  character.  For  the  individual  business 
man  these  are  business  facts;  they  will  teach  him  more 
about  the  conditions  under  which  he  is  striving  to  do  busi- 
ness than  he  can  learn  at  first  hand  for  himself.  It  would 
be  wise  for  every  progressive  manufacturer  and  merchant 
to  keep  in  touch  with  materials  of  this  sort. 


108  COMMERCIAL  RESEARCH 

A  similar  kind  of  research  work  has  been  taken  up  by 
certain  large  daily  newspapers,  and  weekly  and  monthly 
periodicals.  Their  purpose  evidently  is  to  be  able  to  give 
advice  that  is  worth  while  to  those  who  plan  to  advertise 
commodities  among  the  people  reached  by  these  papers. 
There  is  nothing  philanthropic  in  this  work.  It  is  a  real- 
ization of  the  fact  that  a  superior  knowledge  of  market 
and  trade  conditions  is  a  part  of  the  service  which  these 
media  have  to  sell.  A  notable  example  of  this  character 
of  merchandising  service  is  offered  by  the  Chicago  Trib- 
UTie.  A  survey  of  the  Chicago  market  was  made  by  this 
paper  in  1913.  The  entire  city  was  laid  out  in  districts 
very  carefully  selected,  and  these  districts  were  covered 
by  personal  interviewers.  The  investigators  carried  with 
them  a  long  questionnaire  and  went  from  house  to  house  to 
get  answers  direct  from  those  living  in  the  district.  It 
was  not  possible  to  visit  every  one  in  this  vast  market, 
but  representative  individuals  were  selected  and  inter- 
viewed. As  a  result  of  this  survey,  the  Chicago  Tribune 
now  claims  that  it  knows  more  about  Chicago  as  a  market 
than  any  other  individual  or  firm.  In  order  to  keep  this 
service  up  to  date  and  immediately  available  for  merchants 
and  manufacturers  who  desire  to  advertise  in  this  market, 
the  paper  has  established  what  it  calls  "  A  Merchandise 
Service  Department,"  and  it  is  the  duty  of  this  department 
to  answer  all  inquiries  about  the  possibilities  of  advertising 
in  the  Chicago  market.  From  time  to  time  tliis  depart- 
ment extends  its  survey  and  adds  to  the  materials  which 
it  has  on  file.  It  claims  to  give  absolutely  unprejudiced 
information  in  answer  to  all  inquiries. 

A  service  of  a  similar  cliaracter  is  offered  by  many 
other  well-known  papers.  This  is  true  of  the  leading 
newspapers  in  the  larger  cities   and  is  extending  to  the 


SOURCES  OF  BUSINESS  FACTS  109 

smaller  towns.  Even  the  farm  papers  are  taking  up  this 
subject  with  seriousness.  Among  these  latter  a  notable 
example  is  Successful  Farming,  which  has  devoted  consid- 
erable attention  to  the  subject  of  getting  up-to-date,  reli- 
able information  on  the  agricultural  market. 

It  is  probable,  however,  that  the  publisher  who  has  gone 
farthest  in  this  kind  of  work  is  the  Curtis  Publishing  Com- 
pany. This  company  established  several  years  ago  a 
commercial-research  department,  which  was  placed  in 
charge  of  a  very  shrewd  and  careful  investigator.  From 
the  humble  beginnings  of  a  desk  in  a  corner  of  a  room, 
this  man  has  built  the  department  up  to  broad  propor- 
tions. From  the  very  beginning  he  began  to  build  along 
broad  lines.  His  work  has  so  justified  itself  in  the  eyes 
of  the  management  that  they  have  been  willing  to  invest 
large  sums  in  research  work.  It  is  possible  for  this  com- 
pany to  carry  on  investigations  on  a  national  basis.  They 
are  not  limited  to  local  markets  as  are  most  newspapers. 
In  the  past  six  or  seven  years  the  research  department  of 
the  Curtis  Publishing  Company  has  investigated  with  un- 
usual thoroughness  the  marketing  problems  connected  with 
farm  implements,  automobiles,  farm  tractors,  food  prod- 
ucts, musical  instruments,  etc.  Although  the  information 
secured  by  this  national  research  work  has  been  largely  of 
a  confidential  character,  the  company  has  been  very  gen- 
erous in  permitting  business  men  to  benefit  from  its 
work. 

These  researches,  however,  have  not  been  done  without 
a  practical  purpose.  This  publisher  was  not  seeking 
truth  merely  for  truth's  sake.  He  believes  that  his  com- 
pany should  be  in  a  position  to  tell  the  manufacturer  or 
merchant  what  he  wants  to  knoAv  about  his  business.  The 
ideal  seems  to  be  to  know  more  about  the  business  than 


110  COMMERCIAL  RESEARCH 

the  manager  himself  does.  It  is  possible  for  this  company 
to  take  a  far  broader  and  more  impartial  and  impersonal 
point  of  view  than  any  individual  can.  The  outlook  is 
that  of  an  entire  national  market.  The  investigation 
usually  covers  the  historical  development,  the  present  sit- 
uation and  the  future  prospects  of  the  industry  under  con- 
sideration. With  the  material  at  hand,  this  publisher  can 
demonstrate  the  possibilities  of  extending  the  bounds  of 
the  market  for  any  individual.  Unexploited  regions  can 
be  outlined.  The  forces  that  have  made  for  success  or 
failure  in  any  particular  business  can  be  identified.  This 
kind  of  information  is  of  inestimable  value  to  the  business 
manager.  In  so  far  as  it  is  possible  for  him  to  use  it,  he 
should  avail  himself  of  the  opportunity. 

Trade  Journals  and  Associations.  Another  source  of 
information  is  to  be  found  in  the  trade  journals  which  have 
multiplied  rapidly  in  recent  years.  About  three  thousand 
of  these  are  in  existence  to-day.  There  is  no  line  of  goods 
of  more  than  local  importance  that  does  not  have  some 
kind  of  a  trade  paper  devoted  especially  to  its  interests. 
These  papers  are  filled  with  items  of  news  bearing  upon 
various  phases  of  the  commercial  problems  connected  with 
the  marketing  of  goods.  Some  of  them  give  very  highly 
technical  information ;  others  are  largely  filled  with  news 
and  gossip  of  the  trade.  There  arc,  for  example,  almost 
a  score  of  journals  that  deal  with  some  phase  of  the  iron 
and  steel  business.  Any  one  interested  who  has  the  op- 
portunity to  read  these  journals  carefully  will  be  able  to 
glean  from  their  pages  a  vast  amount  of  valuable  infor- 
mation. The  automobile  business,  also,  has  more  than  a 
dozen  trade  papers  devoted  to  its  interests.  Some  of 
these  carry  highly  valuable  information.  There  are  like- 
wise many  trade  papers  having  to  do  with  textiles.     In 


SOURCES  OF  BUSINESS  FACTS  111 

so  far  as  it  is  possible  for  any  one  whose  interests  touch 
the  textile  industry,  he  should  keep  in  contact  with  the  best 
of  these  trade  papers. 

A  real  mine  of  information  is  to  be  found  in  the  com- 
mercial and  financial  papers.  Some  of  these  are  pub- 
lished daily,  some  weekly.  As  examples  of  the  best  type 
of  those  that  carry  the  most  reliable  information  for  any 
one  interested  in  commercial  research,  are  the  New  York 
Journal  of  Commerce,  the  Commercial  and  Financial 
Chronicle,  The  Annalist,  The  Wall  Street  Journal,  The 
Economic  World,  etc.  There  are  also  special  editions  of 
the  daily  papers  that  frequently  contain  good  business 
information.  Access  should  be  had  by  any  one  who  is 
interested  in  research  to  papers  of  this  character.  Of  a 
more  general  character  are  the  economic  journals  that  are 
published  monthly  or  quarterly.  Examples  of  this  kind 
of  journal  are  the  Quarterly  Journal  of  Economics,  The 
American  Economic  Review,  the  Journal  of  Political 
Economy,  etc.  A  large  part  of  these  journals  is  given 
over  to  a  theoretical  discussion  of  economic  principles, 
but  now  and  again  they  carry  articles  of  considerable 
interest  on  certain  phases  of  business  problems.  This 
source  of  information  cannot  be  neglected. 

In  addition  to  these  sources  of  information  there  are 
many  others.  Market  news,  for  example,  is  issued  by 
various  associations  from  day  to  day,  dealing  with  local 
conditions.  Certain  large  wholesalers  and  retailers  like- 
wise publish  open  letters  from  time  to  time.  There  are, 
for  example,  the  weekly  letter  of  John  V.  Farrell,  Marshall 
Field's  News  Letter,  Dun's  Review,  etc.  Bradstreet's  and 
Dun's  Review  are  devoted  particularly  to  a  survey  of 
trade  conditions.  There  are,  too,  the  business  magazines 
to  which  practical  men  contribute,  either  directly  or  by 


112  COMMERCIAL  RESEARCH 

interview,  which  frequently  contain  very  suggestive  mate- 
rial. Certain  advertising  agencies  publish  from  time  to 
time  business  information  in  illustration  of  the  service 
which  they  perform. 

In  these  later  days  there  is  appearing  a  new  kind  of 
organization  which  may  prove  of  the  greatest  benefit  to 
business  men.  This  is  the  so-called  trade  association.  It 
includes  all  commercial,  industrial,  and  trade  organizations 
whose  purpose  is  the  betterment  of  business.  Of  these 
there  are  about  seven  thousand  in  the  United  States. 
Chambers  of  Commerce,  Commercial  clubs,  Boards  of 
Trade,  and  other  business  organizations  whose  purpose  is 
to  promote  the  trade  of  a  community,  number  approxi- 
mately twenty-five  hundred.  There  are  one  thousand 
manufacturing  and  mercantile  associations  of  a  general 
character.  Of  trade  associations  proper  —  that  is, 
groups  of  men  in  a  particular  line  of  business  —  there  are 
three  thousand.  It  is  the  last  named  typo  of  association 
that  is  fast  increasing  in  importance.  This  association  is 
entering  into  all  fields  of  business  endeavor.  Some  men 
make  it  their  special  business  to  organize  and  promote 
such  organizations.  In  general,  they  are  based  upon  some 
mutual  interest,  such  as  similarity  of  problems,  or  the  fact 
that  they  handle  the  same  commodities,  or  because  they 
belong  to  related  industries.  These  institutions  are  real- 
izing the  need  of  a  more  complete  knowledge  of  business 
problems.  There  is,  therefore,  developing  what  is  gener- 
ally called  the  educational  department.  As  a  matter  of 
fact  this  department  is  a  research  department  in  which 
are  collected  and  analyzed  the  pertinent  and  essential  facts 
of  business  along  the  particular  lines  in  which  the  associa- 
tions are  interested.  The  special  point  to  be  emphasized 
is  that  these  trade  associations  afford  splendid  machinery 


SOURCES  OF  BUSINESS  FACTS  113 

for  business  research.  Through  their  educational  de- 
partments and  by  means  of  their  annual  conferences,  they 
are  fast  educating  themselves  in  better  business  methods. 
But  much  yet  remains  to  be  done.  Their  work  is  still  far 
from  being  effectively  organized.  The  possibilities  of  such 
associations  are,  however,  obvious.  Something  more  will 
be  said  later  in  detail  about  their  organization  and  effort. 

Reference  Books.  The  libraries,  both  public  and  pri- 
vate, that  are  scattered  so  copiously  throughout  the  coun- 
try, are  well  stocked  w^ith  all  sorts  of  reference  books. 
There  are  some  people  who  spend  all  their  time  in  trying 
to  find  out  what  others  are  doing,  and  they  seem  to  enjoy 
this  work.  The  result  of  their  labor  is  to  be  found  in 
large  volumes  that  give  excellent  summaries  of  useful  in- 
formation. Any  library  of  respectable  size  will  also  have 
a  reference  librarian  who  will  be  able  to  guide  the  inquirer 
to  the  most  direct  and  economical  medium  of  finding  out 
the  desired  facts.  This  reference  librarian  is  a  very  use- 
ful person  to  anybody  who  desires  to  utilize  the  library 
itself.  In  the  past  the  business  man  has  been  extremely 
shy  of  this  individual.  He  has  thereby  lost  many  hours 
of  time  and  has  failed  to  make  use  of  free  and  competent 
service. 

Among  the  reference  books  which  the  business  investi- 
gator will  need  to  consult  the  most  obvious  ones  are  ency- 
clopedias and  dictionaries,  both  general  and  specialized. 
There  are  the  well-known  general  encyclopedias  repre- 
sented by  the  "  Encyclopedia  Britannica,"  and  there  are 
a  number  of  geographical  and  technical  encyclopedias. 
Some  dictionaries,  also,  have  extended  the  scope  of  their 
investigation  beyond  the  mere  definitions  of  words  so  as  to 
include  useful  information  about  all  sorts  of  subjects. 
Specialized  encyclopedias  and  dictionaries  are  typified  by 


114  COMMERCIAL  RESEARCH 

the  "  Cyclopedia  of  Agriculture  "  and  the  "  Dictionary  of 
Economics."  There  are,  of  course,  many  others  both  in 
English  and  in  foreign  language.  In  addition  to  these, 
the  libraries  contain  year  books  dealing  with  particular 
countries  like  Russia,  China,  or  Great  Britain,  and  con- 
taining in  summary  and  analytic  form  most  useful  infor- 
mation. Under  this  heading,  also,  will  come  the  "  States- 
men's Year  Book,"  which  is  a  familiar  adjunct  to  the 
library.  In  the  same  class  should  be  the  World  Alma- 
nac, which  is  a  great  compendium  of  information  of  all 
sorts  of  subjects. 

There  are  other  reference  books  of  various  character 
that  may  be  used  by  the  business  investigator.  One  t3^e 
is  illustrated  by  "  Thomas'  Register."  This  volume  is 
probably  too  expensive  for  the  individual  business  man  to 
own  for  himself  and  yet  it  may  be  consulted  conveniently 
at  the  nearest  library.  Dun  and  Bradstreet  are  probably 
too  well  known  to  mention.  There  are,  of  course,  various 
kinds  of  atlases  which  should  be  at  hand  and  probably 
should  be  owned  by  the  business  man  himself.  Our  new 
ventures  into  foreign  trade  have  revealed  an  appalling 
ignorance  of  geography  on  the  part  of  the  American  busi- 
ness man.  Unfortunately  this  ignorance  applies  likewise 
to  domestic  trade.  It  will  be  wise,  therefore,  for  every 
business  investigator  to  make  himself  familiar  with  at  least 
one  good  type  of  atlas. 

Something  further  should  be  said  on  the  subject  of 
using  the  library.  It  was  a  generous  thought  in  the  mind 
of  Mr.  Carnegie  when  he  decided  to  devote  a  substantial 
part  of  his  wealth  to  the  founding  of  libraries.  It  may  be 
to-day  that  these  libraries  have  become  a  burden  on  certain 
communities  because  they  do  not  fulfill  a  definite  need. 
But  such  institutions  are  founded  not  alone  for  carrying 


SOURCES  OF  BUSINESS  FACTS  115 

the  best  sellers  of  the  year  or  for  the  use  of  sentimental 
schoolgirls  in  their  desire  to  read  "  gushing  stories  "  of 
heroes  and  heroines,  but  also  to  carry  technical  and  busi- 
ness books  that  may  be  of  use  in  solving  the  serious  prob- 
lems of  practical  affairs.  There  is  no  doubt  that  technical 
and  business  departments  would  immediately  grow  in  re- 
sponse to  a  demand  of  this  character.  It  is  really  an 
inspiring  sight  to  see  the  use  to  which  certain  technical  and 
business  libraries  are  being  put  to-day.  A  visit  to  such  an 
institution  as  the  John  Crerar  Library  in  Chicago  will 
illustrate  this  assertion.  People  who  go  there  go  for  seri- 
ous purpose.  The  information  is  varied  and  is  free. 
Such  an  institution  becomes  a  public  benefaction. 

Miscellaneous  Sources.  In  addition  to  the  sources  men- 
tioned here,  there  are  numerous  others  which  may  be 
used.  Chance  items,  for  example,  come  to  the  attention 
of  every  business  man.  These  should  be  preserved  for 
future  use.  They  appear  unexpectedly  in  the  columns  of 
newspapers  and  magazines  and  must  be  cared  for  at  once 
or  they  are  lost.  There  is,  also,  the  telephone  directory 
and  the  city  directory ;  there  are  various  kinds  of  business 
directories  and  there  are  such  useful  books  as  those  repre- 
sented by  W.  S.  Thompson's  "  A  Directory  of  Mailing 
Lists."  The  first  part  of  this  volume  gives  a  list  of  books 
and  pamplilets  in  which  mailing  lists  are  to  be  found. 
The  second  part  is  a  classified  index  of  the  first  part.  All 
such  miscellaneous  sources  as  these  should  be  known  to 
and  used  by  the  business  investigator. 

Conclusion.  This  general  survey  of  the  sources  of  busi- 
ness facts  has  been  made  to  give  suggestions  as  to  the 
available  material  for  any  business  man  who  is  interested 
in  research  work.  It  is  a  wise  policy  to  make  use  of  all  the 
existing  machinery  which  may  be  adapted  to  the  service  of 


116  COMMERCIAL  RESEARCH 

business  analysis.  Where  such  machinery  exists  there  is 
no  need  to  duplicate  it  by  a  new  organization.  Very  few 
business  men  either  realize  or  utilize  the  means  of  securing 
facts  which  lie  near  at  hand. 

It  has  been  said  that  the  beginning  of  business  research 
is  an  attitude  of  mind.  This  means  that  the  business  man 
must  be  interested  in  experimenting  and  in  observing  the 
details  of  business  as  he  finds  them.  Probably  the  most 
essential  source  of  business  knowledge  is  the  experience 
and  observation  of  the  individual  business  man.  Observe, 
experiment,  and  conclude  are  the  three  watchwords  upon 
which  modern  experimental  science  has  been  based.  Busi- 
ness as  a  science  will  need  to  use  the  very  same  principles. 
So  that  apart  from  these  external  sources  of  information 
which  lie  on  every  hand,  the  mind  and  eye  of  the  investi- 
gator should  be  used  to  the  fullest  extent  possible.  Intel- 
ligent observation  and  thoughtful  consideration  are  two 
corner  stones  of  scientific  research. 


CHAPTER  V 

THE    CHARACTER    OF    BUSINESS    FACTS 

Business  facts  and  principles  —  Precise  facts  —  Estimated  values  — 
Analysis  of  commodity  —  Trade  organization  —  The  market  —  Popu- 
lation statistics  —  Wealth  statistics  —  Wages  and  prices  —  Per  capita 
consumption  —  Incomes  —  Standards  of  living  —  Markets  for  special 
commodities  —  Direction  of  expenditure  —  Business  habits  —  The  will 
to  buy  —  Potential  markets  —  The  effect  of  nationality  —  Miscellane- 
ous factors  —  Conclusion. 

While  the  aim  of  business  research  is  to  determine  an 
intelHgent  policy,  the  subject  matter  is  made  up  of  busi- 
ness facts.  These  will  come  under  various  guises  and  fre- 
quently may  escape  attention  unless  one  knows  how  to 
identify  them  and  to  use  them.  These  facts  may  have 
meaning  or  not,  according  as  they  can  be  interpreted  into 
terms  of  practice.  They  may  be  mere  facts  —  that  is,  of 
no  consequence  —  or  they  may  be  pertinent  and  essential. 
It  is  the  ideal  in  commercial  research  to  know  all  of  the 
factors  that  influence  one's  business  for  good  or  for  ill. 
It  is  proposed  here  to  examine  the  character  of  business 
facts  which  the  manager  may  use  in  analyzing  his  business 
problems. 

Business  Facts  and  Principles.  It  cannot  be  stressed 
too  much  that  the  object  of  research  is  more  intelligent 
management.  Immediate  results  are  not  always  the  best 
results  nor  are  they  always  to  be  attained  by  analysis. 
Business  that  is  worth  doing,  that  is  really  worth  giving 
one's  best  years  and  energy  to  developing,  is  the  business 

']17 


118  COMMERCIAL  RESEARCH 

that  is  permanently  founded.  The  foundations  of  such  a 
business  must  be  laid  deep  and  strong  and  the  policies  of 
such  a  house  must  be  sound  and  true.  The  wise  business 
man  builds  for  the  future  as  well  as  for  the  present. 
Analysis  will  afford  a  keener  insight  and  a  clearer  fore- 
sight for  every  business  manager. 

Business  data  are  not  of  great  value  unless  they  are 
used.  They  can  be  used  effectively  and  intelligently  only 
when  translated  into  workable  principles  and  policies.  It 
is  a  generally  accepted  saying  that  business  follows  a  line 
of  least  resistance.  This,  however,  is  an  empty  phrase 
until  it  has  been  given  a  content  of  fact.  Altogether  too 
much  business  research,  particularly  as  it  finds  expression 
in  popular  magazines,  is  made  up  merely  of  business  gos- 
sip. There  seems  to  be  a  definite  editorial  policy  among 
these  business  journals  that  only  the  successful  business 
ventures  should  be  written  up.  Everybody  knows,  how- 
ever, that  one  learns  as  much  at  least  from  his  failures  as 
from  his  successes.  It  is  also  probably  true  that  the 
reasons  for  failure  are  more  important  than  the  explana- 
tion of  a  chance  success.  There  has  been  much  emphasis 
upon  the  romantic  element  in  American  business.  Gener- 
ally, business  romance  has  meant  a  sudden,  phenomenal 
success.  Very  often  this  success  has  been  as  unexpected 
as  it  has  been  sudden.  The  account  of  such  a  business 
may  have  good  news  value,  but  cannot  have  any  very  great 
permanent  educational  value.  As  a  matter  of  fact,  too 
much  business  writing  has  had  to  do  merely  with  business 
gossip. 

There  is  a  vital  distinction  to  be  made  between  business 
news  and  business  principles.  The  former  is  generally 
made  up  mostly  of  rumor  and  second-hand  information. 
It  is  usually  prefaced  with  the  words,  "  I  heard,  etc."     In 


CHARACTER  OF  BUSINESS  FACTS        119 

the  courts  hearsay  testimony  is  disregarded.  Such  a  prin- 
ciple would  be  of  considerable  advantage  among  business 
men.  One  may  be  interested  to  learn  that  his  competitor 
across  the  street  bought  a  consignment  of  goods  that 
would  not  sell,  or  that  he  was  able  to  clear  out  a  lot  of 
shopworn  stock  at  good  values.  But  such  items  as  this 
are,  after  all,  only  the  gossip  of  the  street.  They  do  not 
reach  back  to  any  fundamental  or  essential  principles. 

In  the  great  grain  exchanges  there  are  certain  machines 
that  tick  off  news  from  day  to  day  on  broad  strips  of 
paper.  Dealers  on  the  exchange  read  with  very  great  in- 
terest whatever  appears  on  these  ticker  sheets.  It  is  called, 
however,  by  the  trade  the  "  gossip  of  the  pit."  The  rea- 
son for  this  is  obvious  to  those  who  will  read  the  news  that 
comes  in  this  manner.  It  is  made  up  of  reports  from  one 
point  or  another,  of  what  such  an  expert  has  said  as  to 
crop  conditions,  rumors  of  drought,  or  pest,  or  calamity, 
news  of  rain  in  some  productive  area ;  but  all  of  these  facts 
are  given  to  the  public  only  after  they  have  been  censored 
by  some  brokerage  firms  who  have  traded  on  the  superior 
knowledge  which  their  experts  have  given  them.  In  other 
words,  all  the  news  that  comes  through  the  channels  of 
gossip  into  the  pit  has  already  been  discounted  in  the 
market.  Besides,  only  those  things  which  the  brokerage 
firm  cares  to  have  known  by  its  competitors  are  permitted 
to  reach  the  pit  in  this  manner.  Back  of  this  gossip  lies 
the  machinery  for  collecting  news,  for  analyzing  and  in- 
terpreting news,  all  the  forces  that  make  for  an  increase  or 
decrease  of  price,  the  world-wide  influences  affecting  the 
production  of  staple  products.  The  gossip  is  merely  the 
froth  and  foam  on  the  surface  and  may  not  even  indicate 
the  direction  of  the  world-wide  current  below.  The  same 
is  true  of  business  principles  and  business  gossip.     Dis- 


120  COMMERCIAL  RESEARCH 

jointed  and  disconnected  business  facts  may  be  only  like 
the  gossip  of  the  pit,  interesting  for  the  moment,  but  al- 
ready discounted,  used,  and  discarded. 

This  distinction  between  mere  business  facts  and  sound 
business  principles  may  be  made  clear  by  an  illustration. 
The  claim  has  been  made  that  the  following  is  a  sound 
principle  of  action  for  the  business  manager:  "Persist- 
ent advertising  can  be  maintained  before  more  people 
at  less  cost  in  the  street  cars  than  in  any  other  me- 
dium known  to  mankind."  Such  a  statement  can  be 
arrived  at  safely  only  through  a  long  and  careful 
course  of  analysis  of  business  facts.  That  such  a  study 
does  lie  behind  the  broad  principles  stated  is  obvious 
from  what  follows  in  the  same  discussion.  Facts  have 
been  collected  to  show  that  3,900,000  people  ride 
daily  in  the  street  cars  in  the  section  under  survey. 
That  these  facts  are  reliable  is  proved  by  their  source. 
They  are  taken  from  the  records  of  the  Public  Serv- 
ice Commissions  who  supervise  the  street-railway  systems 
in  the  given  section  of  country.  The  rate  of  charge 
for  a  street-car  advertising  card  ll'^x  21''  enables  the 
advertiser  to  put  a  card  in  every  car  in  this  region  for 
about  $100.00  per  day.  "  That  is  to  say,  it  will  cost  you 
at  the  rate  of  something  like  .$1.00  to  reach  3,900  people, 
or  1^  to  reach  390  people."  There  are  many  other  facts 
that  lie  back  of  these  assertions,  likewise,  but  this  is 
enough  to  illustrate  the  point.  The  business  principle 
develops  from  business  facts,  provided  that  the  business 
facts  are  pertinent  to  the  question  under  consideration. 
All  principles,  all  rules  of  action  must  grow  out  of  indi- 
vidual facts.  Careful,  persistent  accumulation  of  data  is 
first  necessary.  This  gathering  of  data  should  be  fol- 
lowed by  a  process  of  sifting,  analj'zing,  and  interpreting. 


CHARACTER  OF  BUSINESS  FACTS        121 

It  is  only  in  this  way  that  facts  can  be  translated  into 
terms  of  business  practice  and  policy. 

The  beginning  of  all  business  analysis  is,  therefore, 
business  data.  They  may  be  collected  from  many  differ- 
ent sources,  they  may  appear  in  many  different  forms, 
and  they  may  be  of  varying  importance.  How  shall  one 
recognize  the  importance  and  significance  of  business  data.** 
He  can  do  this  only  by  an  understanding  of  the  character 
of  business  facts.  In  general,  these  facts  will  be  of  two 
sorts ;  there  are,  first,  the  precise  facts  that  the  records 
show,  and,  second,  there  are  the  estimated  values  which  are 
of  a  much  larger  class,  and  are  far  more  complicated. 
Data  of  this  sort  will  have  to  do  with  all  phases  of  busi- 
ness ;  but  wherever  they  appear  they  will  fall  into  one  or 
the  other  of  these  groups. 

Precise  Facts.  These  facts  may  be  defined  as  definite 
figures  for  definite  units.  For  example,  a  merchant  may 
sell  fifty  yards  of  cloth  at  one  dollar  per  yard.  These 
are  precise  facts  in  two  different  kinds  of  units.  The 
yards  represent  the  unit  of  measure  or  quantity,  the  dol- 
lars represent  the  unit  of  monetary  value.  Another  item 
might  give  the  amount  of  raw  materials  purchased  in  other 
kinds  of  units.  For  example,  it  might  consist  of  one  hun- 
dred bales  of  cotton  at  25^  per  pound;  but  here,  again, 
are  the  same  precise  facts  in  different  units.  Or  a  sales- 
man might  send  in  from  the  field  an  order  for  a  certain 
amount  of  goods  which  he  had  sold.  These,  likewise, 
might  appear  in  definite  figures  and  would  represent  units 
of  quantity  or  quality  or  monetary  value. 

So  far  as  definite  figures  correspond  to  definite  units, 
they  are  not  difficult  to  deal  with.  One  can  find  the  sum 
total  of  orders  for  a  definite  period  in  any  one  of  the  units 
desired.     This  sum  total  will  be  as  accurate  as  those  who 


122  COMMERCIAL  RESEARCH 

deal  with  them  are  careful.  It  is  possible  to  reach  prac- 
tically absolute  accuracy  so  far  as  results  are  concerned. 
Facts  of  this  kind  are  those  which  appear  generally  in  the 
records  of  sales  or  of  purchases.  The  business  man, 
manufacturer  or  merchant,  will  have  recorded  in  his  books 
in  actual  figures  the  materials  or  the  goods,  and  their 
prices,  which  he  has  bought  and  sold.  The  item  given 
above  of  the  number  of  people  traveling  daily  in  the  street 
cars  of  New  England  represents  an  instance  of  precise 
facts.  It  is  presumed  that  these  have  been  carefully 
transcribed  from  the  books  of  the  Public  Service  Commis- 
sions. The  warehouse  man  will  have  records  which  show 
the  precise  amount  of  goods  stored  in  his  warehouse,  or  the 
number  of  bushels  of  wheat  in  his  elevator.  These,  also, 
are  precise  facts. 

It  may  be  said,  in  general,  that  business  facts  drawn 
from  the  ledger  accounts  are  of  this  precise  character. 
In  so  far  as  these  facts  are  in  themselves  accurate,  one  can 
reach  absolutely  definite  results.  In  other  words,  in  deal- 
ing with  facts  of  this  kind  the  chief  element  to  be  con- 
sidered is  the  personal  element  of  those  who  transcribe 
them.  There  should  be  no  need  to  insist  on  carefulness 
and  accuracy  in  this  regard.  It  is,  of  course,  an  elemen- 
tary principle  of  business. 

Estimated  Values.  The  chief  distinction,  it  is  said, 
between  general  commercial  accounts,  which  are  an  or- 
derly arrangement  of  precise  facts,  and  cost  accounting, 
which  is  an  attempt  to  analyze  the  expenses  of  a  business, 
lies  in  the  fact  that  the  former  deals  with  precise  facts 
while  the  latter  has  to  do  with  estimated  values.  In  both 
cases,  to  be  sure,  definite  figures  are  employed,  but  these 
figures  have  essentially  different  missions.  A  statement 
that  fifty  yards  of  cloth  have  been  sold  at  one  dollar  per 


CHARACTER  OF  BUSINESS  FACTS        123 

yard  is  a  definite  record  of  a  past  transaction.  There  can 
be  no  change  in  that.  When  a  manufacturer  or  a  mer- 
chant, however,  makes  an  inventory  of  his  stock  the  ques- 
tion is  a  different  one.  In  this  inventor}^  there  may  be 
an  item  which  reads  "  Fifty  yards  of  cloth,"  for  which  a 
definite  amount  of  money  per  yard  has  been  paid.  So  far 
the  transaction  runs  on  precise  facts.  But  the  conclusion 
that  the  goods  are  worth  more  than  the  amount  paid  for 
them  or  less  than  that  amount  is  quite  another  matter. 
There  is  a  constant  process  of  deterioration  even  of  goods 
that  are  of  the  most  lasting  and  durable  character.  De- 
preciation is  constantly  going  on.  "  Destruction  is  the 
law  of  nature,"  it  has  been  well  said.  With  certain  excep- 
tions, this  is  true  of  every  kind  of  business.  Nothing  is 
exempt  from  this  law  of  nature.  Nothing  can  thwart  it. 
"  All  machinery  is  on  an  irresistible  march  to  the  junk 
heap,  and  its  progress,  while  it  may  be  delayed,  cannot  be 
prevented  by  repairs."  (Hatfield,  "  Modern  Account- 
ing," p.  121.) 

Herein  lies  the  essential  difference  between  precise  facts 
and  estimated  values.  Behind  the  precise  facts  in  the 
ledger  lie  these  intangible  and  unexpressed  judgments 
which  are  based  upon  many  other  things  than  numbers 
that  appear  on  the  page.  It  is  with  these  estimated 
values  that  the  business  man  has  most  constantly  to  deal. 
They  do  not  by  any  means  appear  always  as  indicated 
above  in  the  form  of  cost  accounts.  They  frequently 
must  be  read  between  the  lines  of  a  general  description. 
They  are  often  merely  implied  in  abstract  statements. 
Nevertheless,  they  are  there  and  it  is  the  part  of  the  one 
engaged  in  commercial  research  to  discover  them.  In  fact, 
a  very  large  part  of  commercial  research  is  occupied  with 
this  kind  of  analysis. 


124  COMMERCIAL  RESEARCH 

The  results  obtained  from  estimated  values  find  expres- 
sion in  general  principles  and  rules  of  action.  There  is 
nothing  mysterious  or  extraordinary  about  the  term  "  es- 
timated value."  Business  men  are  making  such  estimates 
every  day.  In  essence  it  means  only  that  every  business 
fact  worth  considering  has  surrounding  it  a  meaning  or  a 
significance  to  which  some  weight  must  be  given.  For 
example,  business  facts  are  the  evidence  for  future  policy. 
The  experience  of  to-day  and  of  yesterday  affords  the 
basis  for  the  action  of  to-morrow.  The  plan  for  to- 
morrow, therefore,  results  from  an  estimated  value  of  the 
experience  of  the  present  and  of  the  past.  The  merchant 
says  that  last  season  his  sales  were  of  such  and  such  a 
character,  and  his  purchases,  therefore,  for  the  coming 
season  will  be  of  such  and  such  an  amount.  Now,  the 
sales  for  last  season  arc  precise  facts,  the  possible  sales 
for  the  coming  season  are  estimated  values. 

The  business  manager  must  make  his  judgment  go  be- 
yond his  experience.  In  doing  this,  he  is  entering  at  once 
the  realm  of  estimated  values.  A  certain  customer  he 
considers  as  typical  of  a  group.  This,  again,  is  an  in- 
stance of  estimated  value.  Whenever  a  figure  is  repre- 
sentative it  means  that  it  is  permeated  with  this  element  of 
estimated  value.  A  manufacturer,  for  instance,  has  cal- 
culated for  every  district  in  the  United  States  the  number 
of  sales  per  capita  that  should  be  made  year  after  year. 
These,  of  course,  are  estimated  values.  Or,  take  again  the 
figures  published  by  the  United  Cigar  Stores  Company 
dealing  with  the  annual  consumption  in  various  large  cities 
throughout  the  country.  The  manager  of  this  concern 
declares  that  the  consumption  of  cigars  per  capita  for 
New  York  City  is  .$1.74  per  year,  for  Chicago  63^,  for 
St.  Louis  $1.21,  for  San  Francisco  $4.60,  for  Milwaukee 


CHARACTER  OF  BUSINESS  FACTS        125 

22^,  for  Atlantic  City  $2.55.  These  figures  are  doubtless 
obtained  by  dividing  the  number  of  cigars  sold  by  the  num- 
ber of  population.  If,  however,  a  sales  plan  is  based  upon 
such  facts  as  this,  there  will  be  another  case  of  estimated 
value. 

Data  of  such  character  are  often  abstract.  They  have 
to  do  with  intangible  and  psychological  factors.  Most  of 
the  facts  concerning  human  beings  are  of  an  estimated 
character.  Take,  for  instance,  the  generalization,  "  If 
people  are  not  instantly  won  to  a  brand,  they  are  also 
very  hard  to  wean  away  from  a  brand."  Such  a  declara- 
tion is,  of  course,  only  an  estimate.  Probably  it  cannot 
be  called  more  than  a  mere  human  tendenc3^  It  is  not 
based  upon  precise  facts  or  probably  even  on  definitely 
estimated  values.  It  is  a  judgment  of  human  character. 
But  of  such  things  as  this  are  business  principles  made. 

It  is  well  worth  while  to  keep  this  distinction  between 
precise  facts  and  estimated  values  in  mind.  Carefulness 
and  accuracy  should  characterize  the  dealing  with  both  of 
these  kinds  of  facts.  It  cannot  be  hoped,  however,  to 
reach  the  degree  of  accuracy  in  estimated  values  that  can 
be  readily  secured  in  precise  data.  Furthermore,  these 
latter  should  be  secured,  because  'the  broader  the  basis  in 
precise  facts,  the  stronger  the  structure  based  upon  them. 
Estimated  values  are  often  little  more  than  hypotheses ; 
that  is,  rules  to  experiment  with.  Such  principles  have 
been  of  very  great  value  in  the  physical  sciences  and  may 
well  be  carried  over  into  business  science.  But  it  must  be 
remembered  that  these  experimental  principles  are  finally- 
decided  by  precise  facts.  Possibly,  estimated  values  may 
be  defined  as  facts  translated  into  judgment. 

Business  facts,  like  a  chameleon,  assume  the  color  and 
characteristics  of  their  environment.     Those  that  have  to 


126  COMMERCIAL  RESEARCH 

do  with  one  phase  of  business  will  have  the  appearance 
characteristic  of  that  phase.  There  will  be  in  them,  also, 
the  weaknesses  and  the  strength  of  that  particular  activ- 
ity. It  may  be  said,  in  general,  that  business  facts  can 
be  classified  on  the  basis  of  fundamental,  commercial  rela- 
tionships. Commodities  are  carried  to  market  for  the 
purpose  of  sale.  Whatever  has  to  do,  therefore,  with 
their  commercial  value  is  essential  to  business  research. 
Data  of  this  sort  can  be  classified  under  three  main  topics. 
There  will  be  the  facts  that  have  to  do  with  the  commodity 
itself.  This  commodity  must  be  carried  to  market  by 
some  kind  of  trade  organization.  This,  therefore,  is  the 
second  chief  topic  for  consideration.  But  the  purpose 
of  economic  activity  is  to  satisfy  human  wants.  It  is  the 
consumer  demand  that  largely  directs  business  activity. 
The  third  chief  topic,  therefore,  is  the  market. 

Analysis  of  Commodity.  Commodities  are  of  two  gen- 
eral classes,  raw  materials  and  finished  products.  A  study 
of  raw  materials  will  lead  one  into  the  facts  that  have  to 
do  with  the  character  of  the  productive  regions.  There 
will  be,  for  instance,  the  geographical  location  of  the  pro- 
ducing regions,  the  characteristics  of  these  regions,  as  to 
size,  climate,  fertility,  methods  of  producing  the  mate- 
rials, figures  to  show  tendency  toward  increase  or  de- 
crease, actual  amount  produced  for  a  number  of  years, 
the  value  of  the  product,  fluctuations  in  price,  and  all  such 
general  data  as  these.  There  will  also  be  the  analysis  of 
the  commodity  as  a  thing  in  itself.  Facts  will  be  secured 
as  to  the  size  of  the  units  of  this  commodity.  For  in- 
stance, cotton  has  a  bale  for  its  unit,  wool  is  sold  by  the 
pound,  ore  may  be  priced  by  the  ton  as  is  coal,  apples  may 
be  sold  by  the  barrel,  other  fruit  by  the  crate.  In  every 
case  one  must  know  the  facts  about  the  units  of  commerce. 


CHARACTER  OF  BUSINESS  FACTS        127 

Inquiries,  also,  should  be  made  as  to  whether  the  com- 
modity is  perishable  or  non-perishable,  whether  it  is  sea- 
sonal or  stead}'  in  supply,  whether  it  requires  preparation 
for  market,  whether  it  is  an  independent  commodity,  or 
whether  it  belongs  with  a  group,  and  what  its  general  rela- 
tion is  to  other  products.  A  careful  study  should  be 
made,  of  course,  of  varieties,  species,  and  grades  of  the 
commodity.  Many  of  these  will  be  technical  facts,  but 
they  are  nevertheless  essential  for  a  full  understanding  of 
commercial  problems. 

In  the  case  of  manufactured  goods,  the  kind  of  facts 
needed  will  be  somewhat  similar  in  character  to  those  of 
raw  materials.  One  of  the  first  steps  in  a  thorough  analy- 
sis of  business  problems  is  an  historical  survey  of  the  busi- 
ness. One  should  know  something  about  the  early  uses  of 
the  commodity,  what  changes  have  developed  in  recent 
years,  in  order  that  he  may  understand  the  present  situa- 
tion. It  is  on  the  basis  of  such  knowledge  that  the  busi- 
ness manager  plans  for  the  future.  Then,  too,  one  should 
be  thoroughly  familiar  with  all  the  characteristics  of  the 
product.  There  is,  further,  a  study  of  the  uses  to  which 
this  product  is  put.  What  is  the  character  of  the  demand 
for  it.^*  Is  this  demand  developed,  undeveloped,  or  possi- 
bly overdeveloped.''  Is  it  a  necessity  or  a  luxury.''  Is 
the  demand  for  it  a  continuous  one,  or  a  seasonal  one.'' 
Such  questions  as  these  need  complete  answers  and  will 
require  an  accumulation  of  business  facts.  The  progres- 
sive business  manager  will  desire  to  know,  also,  the  possi- 
bilities of  technical  or  scientific  analysis  of  his  commodity. 
This  is  especially  essential  in  all  food  products.  There  is, 
again,  the  style  element  as  a  commercial  factor  in  the 
marketing  of  the  finished  products.  These  points,  how- 
ever, will  illustrate  sufficiently  the  character  of  the  data 


1^8  COMMERCIAL  RESEARCH 

which  will  be  needed  for  a  complete  analysis  of  the  prod- 
uct as  an  object  of  commerce. 

Trade  Organization.  Every  commodity  must  have  an 
organization  to  carry  it  over  from  its  source  to  the  mar- 
ket. Business  analysis  demands  that  this  trade  organiza- 
tion be  studied  part  by  part.  It  must  be  kept  in  mind 
clearly,  of  course,  that  a  trade  organization  is  not  a  per- 
manent, unchangeable  thing  and  that  the  existing  organ- 
ization is  not  the  best  or  the  worst  possible  one,  but  is  an 
attempt  to  do  a  required  service  effectively.  It  is  the 
business  of  commercial  research  to  inquire  whether  the 
services  performed  by  middlemen  are  real  services,  what 
the  nature  of  the  services  really  is,  what  reward  is  paid 
for  them,  and  what  defects  are  apparent  in  the  mechanism 
that  has  developed  to  aid  in  distribution.  Data  must  be 
had  on  all  parts  of  this  trade  organization.  A  single 
example  will  suffice  to  illustrate  the  point.  Take  the  mat- 
ter of  market  and  trade  news.  Every  business  manager 
understands  well  that  much  of  his  information  must  come 
to  him  at  second  hand.  It  is  his  duty  to  know  whether  this 
information  about  the  market  and  about  the  quantity  of 
commodities  for  sale  is  reliable  or  not.  In  order  to  deter- 
mine this,  he  must  know  thoroughly  the  source  of  facts, 
whether  there  is  a  bias  in  them  or  not,  who  has  controlled 
them,  whether  any  private  or  selfish  interest  has  colored 
them.  Analysis  of  tliis  sort  is  absolutely  essential  for  in- 
telligent business  management. 

There  are  to-day  many  very  perplexing  problems  aris- 
ing in  connection  with  the  trade  organization.  Some  have 
said  that  the  situation  is  chaotic.  There  is  the  subject  of 
the  new  type  of  retailer  as  illustrated  by  the  department 
store,  the  chain  store,  and  the  mail-order  house.  What 
is  to  be  the  future  of  these  institutions.''     What  is  their 


CHARACTER  OF  BUSINESS  FACTS        129 

weakness  and  what  their  strength?  What  are  the  forces 
disrupting  the  old  organization?  Toward  what  new 
forms  are  we  tending?  What  new  influences  are  at  work 
and  with  what  effect?  These  are  pertinent  questions  for 
the  business  manager  to  ask.  His  policies  will  be  molded 
by  his  interpretation  of  these  facts.  Intelligent  foresight 
demands  that  business  policies  be  adapted  to  shifting  con- 
ditions. Such  adaptation  is  possible  only  by  a  thorough 
knowledge  of  facts. 

The  Market.  The  market  for  any  commodity  is  made 
up  of  the  people  who  desire  it.  In  its  broadest  sense  mar- 
ket means  a  demand  for  a  commodity,  or,  in  economic 
terms,  effective  demand;  that  is,  a  demand  with  a  com- 
pelling force  of  purchasing  power  behind  it.  In  other 
words,  the  market  is  a  chance  to  sell.  The  term  may  refer 
to  a  definite  region  or  to  a  commercial  area  within  which 
the  buyers  deal.  ^Manufacturing  establishments  are  con- 
centrated in  the  cities  and  hence  the  market  for  raw  mate- 
rials which  they  use  are  the  cities.  The  surplus  foodstuffs 
from  the  farms  move  toward  the  centers  of  population,  so 
that  the  larger  the  centers,  the  greater  the  market.  In 
most  cases,  however,  certain  centers  are  highly  specialized 
markets,  are  concentration  points.  Some  explanation 
must  be  sought  for  the  fact  that  while  the  crude  ore  of 
aluminum  is  mined  only  in  one  section  in  Arkansas,  the 
smelting  center  is  St.  Louis  and  the  purifying  centers  are 
in  New  York  State,  while  the  factories  for  making  alumi- 
num ware  are  scattered  through  half  a  dozen  states.  For 
a  clear  understanding  of  the  marketing  of  copper,  reasons 
must  be  found  for  the  fact  that  the  bulk  of  the  supply 
comes  from  mines  in  Western  United  States,  but  that  the 
world  price  has  until  recent  years  been  determined  in 
Bremen,  Germany.     Why   should,   also,   Elgin   become   a 


130  COMMERCIAL  RESEARCH 

great  market  for  butter  and  the  center  of  watchmaking? 
Those  business  men  who  are  interested  in  commodities  of 
this  kind  must  accumulate  the  facts  for  an  explanation  of 
the  existing  situation. 

Commercial  demand  i-s  oblivious  of  state  and  national 
boundaries.  If  such  a  demand  were  charted,  political  lines 
would  be  crossed  and  recrossed.  These  commercial  areas 
run  riotously  across  state  lines,  county  lines,  and  physical 
obstacles,  and  j^et  there  must  be  somewhere  some  clear  and 
reasonable  explanation  for  such  things.  The  analysis,  of 
cour.se,  runs  back  at  last  to  the  elemental  fact  that  de- 
mand emanates  from  man  and  that  man  is  a  bundle  of 
habits,  whims,  fancies,  prejudices,  taste,  willfulness,  and 
vagaries.  Upon  such  an  unstable  foundation  every  mar- 
ket rests.  Amidst  all  these  fluctuations,  however,  there  is 
some  constancy ;  some  rules,  some  principles  are  there. 
There  are  primary  needs  which  must  be  met.  There  are 
staples  to  be  marketed  as  well  as  style  goods.  A  final 
point  should  be  kept  in  mind ;  demand  is  a  demand  for 
something  of  a  particular  kind  at  a  particular  time  and  in 
a  ceptain  quantity.  Any  shift  in  this  demand  will  be  re- 
flected in  the  commodity  to  satisfy  it.  It  is,  therefore, 
impossible  to  study  the  characteristics  of  a  commodity 
wholly  apart  from  the  demand.  There  is  a  continued 
interaction  between  the  commodity  and  this  market.  One 
cannot  logically  be  analyzed  independent  of  the  other. 
From  this  exposition  it  will  be  seen  that  most  of  the  facts 
used  in  commercial  analysis  deal  finally  with  people. 
This  is  generally  called  analysis  of  the  market.  It  means 
a  study  of  the  number  of  people  in  a  commercial  area, 
together  with  their  habits  of  living  and  buying,  their  pur- 
chasing power,  and  their  general  attitude  toward  goods. 


CHARACTER  OF  BUSINESS  FACTS        131 

In  other  words,  it  is  the  study  of  the  population  from  the 
point  of  view  of  commercial  opportunities. 

Population  Statistics.  A  great  deal  of  study  has  been 
given  to  the  facts  pertaining  to  population  in  the  United 
States.  There  has  been,  for  instance,  the  series  of  census 
reports  covering  different  phases  of  this  very  large  and 
complicated  subject.  Many  people  who  have  been  inter- 
ested in  social  problems  have  tabulated  the  facts  about 
various  kinds  of  people  in  various  kinds  of  units.  Nearly 
all  of  these  studies,  however,  are  social  studies  and  not 
economic  analyses.  They  have  looked  toward  the  solution 
of  certain  social  problems  rather  than  toward  the  selling 
of  commodities.  This  does  not  mean  that  they  are  of  any 
less  importance  or  value  than  other  studies  which  may  be 
made.  It  means  that  the  data  thus  accumulated  can  be 
only  incidentally  of  use  to  the  business  manager.  There 
is,  nevertheless,  much  material  worth  his  study  in  these 
reports. 

What,  after  all,  does  one  want  to  know  about  the  mar- 
ket and  about  the  people  who  compose  it?  "  A  market," 
it  has  been  said,  "  is  nothing  more  or  less  than  a  group  of 
purchasers  regularly  seeking  the  same  type  of  goods." 
(Mahin,  "  Advertising,"  p.  17.)  Obviously,  then,  the  pri- 
mary purpose  in  a  study  of  the  market  is  to  identify  this 
group  of  purchasers  for  a  given  product  or  line  of  goods. 
In  order  that  this  group  may  be  identified  various  kinds  of 
facts  must  be  secured.  The  problem  in  some  cases  is  far 
more  complicated  than  in  others.  For  example,  certain 
commodities  have  definite  limitations  to  their  demand. 
The  maker  of  machine  tools  understands  clearly  that  his 
market  is  limited  to  those  manufacturers  who  have  estab- 
lished plants  requiring  his  particular  kind  of  machine. 


132  COMMERCIAL  RESEARCH 

The  maker  of  cream  separators  knows  that  his  demand  is 
limited  to  those  engaged  in  dairying.  The  sellers  of  spe- 
cialties, likewise,  have  a  limited  market  often  very  clearly 
set  apart  from  the  great  mass  of  population.  It  is  in  re- 
gard to  those  goods  for  which  the  demand  is  elastic  and 
wide  in  area  tha?t  the  great  difficulty  arises  in  discovering 
the  essential  facts.  In  regard  to  this  last  group  of  com- 
modities the  character  of  facts  bearing  on  the  market 
will  be  analyzed. 

One  of  the  first  steps  in  the  analysis  of  the  market  is  to 
secure  the  facts  about  the  number  of  people  within  a  given 
commercial  area.  The  demand  will  arise  from  these  indi- 
viduals. It  may,  in  fact,  vary  directly  with  their  number. 
In  almost  every  case  the  number  of  people  and  the  amount 
of  demand  will  have  some  direct  relation.  Standing  alone, 
however,  the  mere  number  of  individuals  is  not  of  any  great 
significance. 

What  is  of  far  greater  importance  is  the  character  of 
the  people  residing  within  this  demand  area.  The  general 
studies  that  have  been  made  of  the  population  in  the  United 
States  have  classified  people  on  the  basis  of  economic 
status,  of  race,  and  of  the  size  of  the  family.  These  three 
units  are  all  of  value  to  the  one  engaged  in  commercial 
research.  It  will  be  remembered  that  the  market  was 
defined  as  effective  demand ;  that  is,  a  demand  that  is 
backed  up  by  purchasing  power.  It  is  from  this  point  of 
view  that  the  economic  status  of  the  people  in  the  market 
area  becomes  of  chief  importance.  For  the  United  States, 
especially,  the  study  of  racial  diff'erences,  as  these  differ- 
ences affect  buying  habits,  is  of  very  great  value.  Prob- 
ably the  unit  which  is  most  used  in  the  analysis  of  a  popu- 
lation is  the  family.  This,  also,  as  will  be  shown  later,  is 
of  great  interest  to  the  business  manager. 


CHARACTER  OF  BUSINESS  FACTS        133 

In  all  of  these  cases  a  large  part  of  the  facts  are  precise 
facts,  and  the  rest  estimates  or  estimated  values.  It  is 
easy  enough  to  count  the  individuals  within  a  given  group 
provided  that  group  is  clearly  defined,  so  that  every  num- 
ber stands  as  a  representative  of  a  human  being.  It  is 
possible  to  know  the  population  of  practically  any  geo- 
graphical division  in  the  United  States.  The  figures  of 
this  kind,  however,  are  accurate  only  for  the  moment  when 
the  analysis  was  made.  One  needs  merely  to  visit  the  rail- 
way stations  in  the  cities  of  the  United  States  to  see  how 
restless  a  population  there  is  here,  and  how  it  is  shifting 
from  day  to  day  to  different  parts  of  the  country.  This 
shifting  makes,  of  course,  for  increased  estimated  values 
even  in  population  statistics. 

The  study  of  population  merely  to  discover  the  number 
of  people  is  very  superficial.  There  are  so  many  influ- 
ences to  determine  the  direction  of  purchasing  power  of 
so  much  greater  importance  than  this  and  so  much  more 
difficult  to  ascertain  that  population  statistics,  as  such, 
are  but  the  first  step  in  market  analysis.  Far  more  im- 
portant than  mere  enumeration  of  individuals  or  of  fam- 
ilies, to  the  merchant  or  to  the  manufacturer,  is  a  knowl- 
edge of  the  way  in  which  they  live,  what  they  buy  to  eat 
and  to  wear,  what  recreations  they  have,  and  all  those  inti- 
mate details  of  social  life  which  are  the  index  to  buying 
habits.  "  The  demand  for  any  article  varies  according 
to  purchasing  power,  living  conditions,  occupations,  racial 
characteristics,  climatic  conditions,  and  numerous  other 
influences  aff'ecting  the  diff'erent  classes  of  customers." 
Data  in  regard  to  these  items  can  almost  never  be  precise. 
They  are  estimates,  calculations,  and  altogether  too  often 
merely  shrewd  guesses.  It  is  a  new  field  for  the  business 
manager  to  attempt  an  analysis  of  these  more  or  less  in- 


134  COMMERCIAL  RESEARCH 

tangible  factors  that  affect  his  business.  Attention  will 
here  be  called  to  the  character  of  the  facts  bearing  upon 
some  of  these  phases. 

Wealth  Statistics.  The  term  "  wealth  "  in  this  sense 
generally  means  the  ability  to  buy.  The  constant  en- 
deavor is  to  translate  this  ability  to  buy  into  terms  of 
dollars  and  cents  as  it  affects  any  given  business.  There 
have  been  from  time  to  time  many  studies  made  into  the 
subject  of  our  nation's  wealth.  Here,  too,  the  desire  was 
to  know  whether  or  not  the  wealth  of  the  country  was 
being  concentrated  in  the  hands  of  a  few  individuals,  while 
the  great  mass  of  people  were  growing  relatively  poorer. 
That  is  to  say,  the  purpose  has  generally  been  to  analyze 
this  question  from  the  social  point  of  view.  There  are 
to-day  no  satisfactory  statistics  on  the  subject.  The 
United  States  Government  has  publislied  rough  estimates 
under  the  title  of  Wealth  Statistics,  but  even  in  doing  so 
has  apologized  for  their  unreliability.  In  any  case,  some 
progress  has  been  made  in  this  direction,  and  a  basis  has 
been  laid  for  a  more  dependable  analysis  in  the  years  to 
come. 

The  analysis  of  the  nation's  wealth  has  usually  been 
divided  into  three  general  divisions.  One  of  these  has 
been  called  the  Division  of  Agriculture  wliich  contains 
the  value  of  products,  the  value  of  the  farm  lands,  mort- 
gage indebtedness,  and  other  items  of  a  like  character. 
The  second  general  division  has  been  termed  Manufac- 
tures. These  data  have  had  to  do  with  the  value  of  raw 
materials  and  the  value  of  finished  products.  There  has 
been  also  a  description  of  the  character  of  these  products 
and  the  concentration  of  their  manufacture.  The  third 
group  of  facts  treats  with  mines  and  quarries.  This 
analysis  also  has  dealt  with  the  value  of  the  mines,  the 


CHARACTER  OF  BUSINESS  FACTS        135 

value  of  the  products  from  them,  and  has  given  some  esti- 
mate of  the  difference  between  the  value  of  raw  materials 
in  the  ground  and  their  value  when  ready  for  use. 

There  are  other  facts  in  the  census  reports  which  deal 
with  certain  phases  of  the  wealth  question.  There  are, 
for  instance,  estimates  of  wealth,  indebtedness,  and  amount 
of  taxation  in  the  country.  The  same  reports  attempt  to 
enumerate  the  various  forms  of  wealth  and  give  estimated 
values  of  these  various  forms.  There  are,  for  instance, 
figures  that  apply  to  real  property,  to  personal  property, 
and  to  public  property.  Another  section  in  the  census 
reports  gives  "  the  estimated  true  value  of  all  property 
and  of  specified  classes  of  property."  These  facts  are 
ranged  on  the  basis  of  geographical  and  political  divisions 
of  the  country.  There  is  to  be  found  here,  also,  an  his- 
torical discussion  as  to  the  growth  of  wealth  by  geo- 
graphic divisions  and  by  states.  One  entire  section  of  the 
report  is  given  to  manufactures.  This  section  contains  a 
description  of  264  individual  industries  with  the  principal 
statistics  for  each.  These  figures  include  the  number  of 
establishments,  the  number  of  wage  earners,  the  amount  of 
wages  paid,  the  value  of  the  products,  and  the  value  added 
by  manufacture.  At  the  end  there  is  a  summary  of  all 
these  figures  for  the  country  as  a  whole. 

The  figures  that  apply  to  economic  status  are  generally 
reduced  to  a  per  capita  basis.  This  means  that  the  total 
amount  in  dollars  and  cents  is  divided  by  the  number  of 
people  within  a  district.  Obviousl}^  these  results  can  have 
little  direct  value  unless  the  distribution  of  the  wealth 
among  the  people  is  also  known.  There  is  so  much-  error 
in  the  statistics  on  this  subject  to-day  that  the  records 
are  only  of  small  service  to  the  one  engaged  in  commercial 
research.     They  arc,  of  course,  much  better  than  nothing 


136  COMMERCIAL  RESEARCH 

at  all,  yet  when  used  they  must  be  used  with  great  care. 
Wages  and  Prices.  In  connection  with  the  subject  of 
purchasing  power,  there  are  the  figures  that  deal  with  the 
average  wages  and  prices.  It  is  possible  to  find  from  the 
population  records  of  the  Federal  Government  the  average 
wages  in  certain  districts  throughout  the  country.  The 
state  of  Massachusetts,  also,  has  published  a  great  many 
statistics  on  this  subject.  Other  states,  likewise,  through 
their  labor  bureaus  are  accumulating  data  wliich  can  be 
used  by  any  business  man  interested.  The  United  States 
Bureau  of  the  Census  publishes  such  statistics  covering 
the  entire  country.  The  Department  of  Commerce 
through  the  Bureau  of  Foreign  and  Domestic  Commerce 
issues  from  time  to  time  some  facts  bearing  on  this  same 
subject.  From  this  source  every  year  there  comes  a  vol- 
ume of  the  statistical  abstract  of  the  United  States.  This 
volume  contains  statistics  that  deal  with  the  area,  natural 
resources,  and  population  of  the  country,  with  agriculture, 
forestry,  fisheries,  manufacturing,  mining,  occupations, 
wages,  prices,  estimates  of  consumption,  and  the  amount 
of  business  carried  on  through  foreign  commerce,  bank 
activities,  questions  of  public  finance  and  of  transporta- 
tion. It  is  an  almost  inexhaustible  source  of  general  ma- 
terial. There  is  issued,  also,  by  the  Bureau  of  Labor  Sta- 
tistics a  series  of  bulletins  containing  facts  in  this  con- 
nection of  interest  to  all  manufacturers  and  merchants. 
These  bulletins  deal  with  such  subjects  as  wholesale  and 
retail  prices,  wages  and  hours  of  labor  in  such  industries 
as  iron  and  steel,  cotton,  wool,  silk,  men's  clothing,  wheat, 
flour,  butter,  etc.  Outside  of  the  regular  sources  there 
are  some  miscellaneous  studies  that  have  been  made  by  this 
bureau  dealing  with  the  hosiery  industry,  women's  knit- 
goods  industry,  etc. 


CHARACTER  OF  BUSINESS  FACTS        137 

There  is,  of  course,  some  relationship  between  the  wages 
paid  to  laboring  men  in  any  given  district  and  the  possi- 
bility of  selling  goods  within  the  same  area.  This  rela- 
tionship, however,  is  not  a  direct  one.  Nor  are  the  fig- 
ures immediately  available  for  the  basis  of  a  sales  plan. 
Nevertheless  they  cannot  be  neglected.  The  same  is  true 
with  prices.  Demand  will  vary  with  some  relation  to  vari- 
ations in  price.  Here,  again,  however,  the  relation  is 
not  a  direct  one.  Average  wages  and  average  prices  may 
or  may  not  be  representative.  This  will  depend  upon 
many  other  factors.  In  a  given  industry,  for  example, 
there  may  be  many  highly  skilled  workmen  who  receive  a 
very  high  wage.  These,  however,  may  be  relatively  few 
in  number  compared  with  the  mass  of  unskilled  workmen 
whose  rate  of  wages  is  relatively  low.  One  cannot  stop, 
therefore,  with  merely  an  average  wage;  he  must  go  fur- 
ther to  find  out  how  wages  are  distributed  within  the 
group.  The  same  principle  holds  true  for  prices.  In 
some  years  the  prices  of  certain  commodities  are  abnor- 
mally high  or  abnormally  low,  and  therefore  make  the 
average  unrepresentative.  It  is  with  data  of  this  sort, 
however,  that  the  business  manager  must  deal.  Some  use 
can  be  made  of  them.  No  matter  how  incidental  the  facts 
may  be,  no  matter  how  much  a  by-product  of  investiga- 
tion, commercial  research  may  use  them  for  its  own  par- 
ticular purpose. 

Per  Capita  Consumption.  Some  estimates  have  been 
made  as  to  how  much  individuals  consume  on  the  average. 
Statistics  of  this  sort  may  be  wholly  misleading  or  may 
be  the  essential  data  which  the  business  manager  requires. 
It  is  said,  for  instance,  that  "  people  eat  about  eighty- 
five  pounds  of  sugar  per  year, —  and  experts  say  that 
country  families  probably  use  more  sugar  per  capita  than 


138  COMMERCIAL  RESEARCH 

city  people.  This  means  that  somewhere  around  405,- 
000,000  pounds  of  sugar  are  each  year  used  by  our  folks 
alone."  Or,  again,  it  is  said  that  over  45,000,000  pairs 
of  first-class  stockings  are  required  by  a  certain  group, 
90,000,000  cakes  of  yeast  a  year,  4,500,000  barrels  of 
flour,  45,000,000  pounds  of  cofFec,  6,600,000  tooth- 
brushes and  12,800,000  tubes  of  tooth  paste,  8,000,000 
bars  of  chocolate,  120,000,000  cakes  of  soap.  These  are, 
of  course,  mere  estimates  and  are  not  in  any  sense  precise 
facts.  Some  of  them  are  declared  frankly  to  be  the  cal- 
culation of  experts,  others  are  given  as  actual  figures. 
Or,  take  again,  another  estimated  market,  that  of  a  news- 
paper with  a  circulation  of  357,689.  It  is  calculated  that 
this  market  will  absorb  annually  for  washing  and  clean- 
ing purposes  alone  about  2,000,000  bottles  of  ammonia, 
178,000  carpet  sweepers,  1,430,000  brooms,  357,000 
mops,  9,942,000  packages  of  washing  powder,  89,000 
wringers,  89,000  washing  machines,  and  1,788,000  cakes 
of  scouring  soap. 

There  can  be  undoubtedly  some  valuable  suggestions 
found  in  groups  of  figures  such  as  those  given  above. 
Nevertheless,  they  must  all  be  taken  with  some  discount. 
On  the  whole  it  is  doubtful  wlicther  this  is  the  proper 
method  of  approaching  the  essential  facts  which  the  busi- 
ness manager  must  have.  Too  often  these  large  sums 
have  been  calculated  from  insufficient  data.  Sucli,  how- 
ever, are  the  business  facts  in  tlieir  character  as  they 
appear  to  the  research  student.  He  must  use  them  as 
best  he  can.  One  tiling  which  he  must  keep  in  mind  is 
that  it  is  a  fatal  blunder  either  to  be  deceived  himself 
or  to  attempt  to  deceive  others  by  an  over-  or  under- 
estimate. Miscalculations  will  surely,  like  chickens,  come 
home  to  roost. 


CHARACTER  OF  BUSINESS  FACTS        139 

Incomes.  The  basis  of  economic  status  is,  of  course, 
the  income.  This  may  be  a  single  income  of  an  individual 
or  the  combined  income  of  some  group  unit  like  the  fam- 
ily. The  status  of  the  group  will  depend  upon  the  total 
income  available  for  purchasing  goods.  If  one  can  know 
this  total  it  is  possible  for  him  to  determine  the  purchas- 
ing power  absolutely  as  a  whole.  There  will  then  remain 
the  difficult  task  of  calculating  how  much  of  the  whole 
will  be  expended  for  any  given  product.  As  a  matter  of 
fact,  income  is  of  consequence  only  as  it  applies  to  a  given 
commodity.  Take,  for  example,  the  possible  market  for 
automobiles.  "  Manifestly  the  possible  sales  of  a  $5,000 
automobile  in  a  city  of  30,000  in  which  only  20  men  earn 
$3,000  a  year  or  over,  as  in  certain  mill  towns,  is  not 
directly  comparable  with  the  possible  sales  in  a  town  of 
30,000  of  purely  residential  character  where  3,000  men 
may  earn  average  salaries  in  excess  of  $3,000.  Substi- 
tute overalls  for  $5,000  automobiles  and  the  market  pos- 
sibilities are  at  once  reversed.  The  common  failure  with, 
and  disgust  at,  attempts  to  put  down  in  dollars  and  cents 
the  possible  buying  capacity  of  named  territories  is  usually 
traceable  to  a  neglect  of  this  very  factor  of  the  '  nature 
of  the  town.'"      {System,  January,  1917,  p.  54.) 

The  first  question  to  ask  in  an  analysis  of  this  phase  of 
the  market  is  —  what  is  an  income.'*  Of  course,  only  the 
actual  income  really  counts.  Men  do  not  spend  money 
from  average  wages,  nor  can  the  amount  available  for 
purchase  be  determined  by  a  knowledge  of  the  daily  or 
monthly  returns,  because  there  are  many  other  factors 
which  will  affect  the  total  amount.  Incomes  will  be  modi- 
fied by  the  character  of  occupation.  The  work  may  be 
seasonal,  intermittent,  or  of  an  irregular  character.  Men 
who  work  out  of  doors  exposed  to  the  weather  cannot,  of 


140  COMMERCIAL  RESEARCH 

course,  have  as  steady  an  income  as  those  who  work  in 
sheltered  places.  There  has  always  been  a  very  great 
difficulty  in  learning  with  accuracy  the  total  income  of 
any  individual  or  group.  Certain  tests,  however,  have 
been  applied  from  time  to  time.  It  may  be  worth  while 
to  mention  some  of  these. 

A  widely  accepted  principle  in  the  cities  as  a  means  of 
best  showing  the  wealth  or  purchasing  power  in  any  given 
district  is  the  amount  of  rent  paid.  An  analysis  was  made 
of  certain  sections  in  one  of  our  large  cities  and  the  re- 
turns were  generalized  in  this  manner :  "  The  rents  in 
the  western  half  of  this  section  are  low,  approximating 
$30.  Toward  the  east  there  is  a  marked  difference. 
Many  stone  houses  and  elegant  apartments  have  lately 
been  erected,  ranging  up  to  ,$200,  but  the  average  for  this 
section  is  about  $90.  Wealth  becomes  more  apparent 
as  Grand  Boulevard  is  approached."  ("  Winning  a 
Great  Market  on  Facts,"  p.  26.)  On  the  basis  of  this 
summary  judgment  was  made  as  to  the  income  and  gen- 
eral purchasing  power  in  this  given  district. 

The  difficulties  in  securing  accurate  tax  returns  reveal 
the  trait  of  human  character  which  makes  all  calculations 
of  wealth  distribution  unreliable.  In  a  case  of  this  kind 
it  is  the  indirect  evidence  that  is  frequently  most  valuable. 
Courts  of  law  lay  considerable  stress  upon  undesigned 
testimony,  believing  that  in  this  kind  of  evidence  all  per- 
sonal bias  has  been  eliminated.  Some  years  ago  a  book 
appeared  on  the  subject,  "  The  Present  Distribution  of 
Wealth  in  the  United  States  "  by  Dr.  C.  B.  Spahr,  the 
material  for  which  was  largely  secured  from  government 
reports,  supplemented  by  careful  investigation  of  the 
Probate  Court  records  in  New  York  State.  Under  a 
state  law  all  inlieritances  of  $5,000  and  above  must  pass 


CHARACTER  OF  BUSINESS  FACTS        14.1 

through  the  records  of  the  court.  It  was  thus  possible 
to  secure  facts  which  were  not  available  from  any  other 
sources.  No  doubt  the  movement  for  income  and  in- 
heritance taxes  throughout  the  United  States  will  afford 
a  considerable  amount  of  material  for  a  study  of  incomes. 

Several  books  have  been  written  on  the  subject  of  in- 
comes among  various  classes  of  people  in  the  country. 
One  of  these  had  to  do  with  the  study  of  expenditures  in 
New  York  City  among  the  working  classes.  (R.  C.  Cha- 
pin,  "  Standards  of  Living  in  New  York  City.")  Others 
have  dealt  with  the  problem  more  generally  for  the  United 
States.  (Nearing,  "  Wages  in  the  United  States,"  F.  H. 
Streightoff,  "  Standards  of  Living  Among  the  Industrial 
People  of  America,  Distribution  of  Incomes  in  the  United 
States.")  A  very  excellent  report  appeared  in  1902  by 
D.  R.  Dewey,  commonly  known  as  the  "  Dewey  Report," 
which  was  compiled  from  the  pay  rolls  of  various  employ- 
ers and  was  later  carefully  analyzed  by  a  statistician  and 
made  available  for  general  use.  Some  states,  also,  are 
collecting  data  particularly  on  wage  incomes  among  the 
working  people  within  their  jurisdiction.  The  most 
notable  of  these  studies  have  been  made  by  the  Labor 
Bureaus  of  Massachusetts,  New  Jersey,  Kansas,  and  Iowa. 
Illinois,  also,  has  collected  a  large  amount  of  data  bear- 
ing on  the  general  wealth  situation.  Some  of  these  point 
incidentally  to  the  size  of  the  income  of  individuals  and 
families. 

So  far  the  material  bearing  on  the  subject  of  incomes 
is  of  an  unsatisfactory  character.  The  Department  of 
Agriculture  has  issued  several  bulletins  dealing  with  the 
farmer's  income,  but  the  material  has  come  too  largely 
from  the  unreliable  wealth  statistics  of  the  census  reports. 
Recently,  however,  some  very  excellent  investigations  have 


U2  COMMERCIAL  RESEARCH 

been  made  in  certain  farming  districts.  These  cannot  yet 
be  called  representative.  They  are,  nevertheless,  well 
worth  careful  study  by  one  engaged  in  commercial  re- 
search. Other  studies,  such  as  those  made  by  the  United 
States  Children's  Bureau,  contain  many  interesting  facts 
in  regard  to  family  incomes  in  certain  manufacturing 
centers.  The  most  that  can  be  hoped  for,  however,  is  to 
secure  a  general  estimate  of  conditions.  This  lack  of 
material  should  not  be  lamented  so  much,  because  incomes 
bear  only  indirectly  upon  potential  markets.  There  are 
many  other  things  of  almost  equal  importance  to  be  con- 
sidered. 

Standards  of  Living.  A  great  deal  has  been  written 
about  the  rising  standard  of  living  among  the  people  of 
the  United  States.  This  phrase  has  only  a  general  and 
vague  meaning.  Nobody  knows  what  a  standard  of  liv- 
ing really  is.  Probably  to  most  people  a  rise  in  the 
standard  of  living  means  that  the  individual  or  family 
group  has  more  money  to  spend.  This  may  or  may  not 
mean  that  the  individual  or  family  is  better  off  econom- 
ically than  before.  All  income  is  a  relative  matter. 
There  may  be  a  nominal  increase  where  more  money  be- 
comes available  for  expenditure,  but  at  the  same  time  the 
prices  of  commodities  rise  in  proportion  with  the  increase 
of  funds.  The  thing  that  really  counts  for  increased 
purchasing  power  is  that  there  sliall  be  an  increase  in 
real  income.  This  would  mean  that  a  larger  amount  of 
purchasing  power  is  made  available  for  the  individual  or 
family  over  and  above  any  increase  in  prices  of  com- 
modities. 

There  are  many  things  that  go  to  make  up  an  indi- 
vidual's standard  of  living.  This  may  be  merely  a  matter 
of  temperament.     There  are  those  who  will  have  certain 


CHARACTER  OP  BUSINESS  FACTS        143 

comforts  of  life  at  whatever  expense  or  sacrifice  in  other 
matters.  Every  one  is  familiar  with  that  type  of  indi- 
vidual who  still  clings  to  all  the  forms  of  a  past  life  of 
plenty  and  leisure  after  his  funds  are  depleted.  In  some 
respects  his  standard  of  living  has  not  changed  with  a 
decrease  of  purchasing  power.  Environment  is  also  a 
part  of  the  standard  of  living.  Some  people  will  pay 
for  a  certain  kind  of  "  atmosphere "  in  which  to  live. 
Tradition  also  is  an  element  in  the  standard  of  living. 
Many  of  our  values  have  come  down  to  us  by  inheritance. 
Certain  groups  lay  more  stress  upon  certain  products 
than  others.  There  is,  of  course,  in  every  social  group 
the  sense  of  fitness  which  influences  the  individual  in  his 
purchases.  There  can  be  no  definite  or  reliable  data  deal- 
ing with  such  an  indefinable  and  intangible  thing  as  the 
standard  of  living. 

There  is  much  yet  to  be  done  in  the  way  of  collecting 
facts  on  the  subject  of  distribution  of  wealth  or  purchas- 
ing power.  Investigations  that  have  been  made  by  pub- 
lic and  private  entcrjDrise,  while  worthy  in  character,  have 
not  been  sufiiciently  comprehensive  or  scientific  to  prove 
satisfactory.  The  hope  has  been  expressed  that  the  Fed- 
eral Government  will  take  up  this  question  and  will  make 
available  the  machinery  for  the  accumulation  of  data  that 
will  furnish  the  basis  for  a  comprehensive  and  thorough 
discussion  of  this  general  subject  of  wealth  statistics. 
Meanwhile  the  manufacturer  and  the  merchant  can  learn 
very  much  from  the  present  available  material.  No  one 
should  be  discouraged  by  the  fact  that  this  material  was 
collected  for  a  different  purpose.  Indeed,  it  may  prove 
all  the  more  valuable  for  the  very  reason  that  it  was  not 
collected  for  an  immediate  commercial  purpose.  Tliat  it 
is  desirable  to   know   the  general   distribution   of   wealth 


14.4.  COMMERCIAL  RESEARCH 

throughout  the  country  and  particularly  the  purchasing 
power  of  districts  or  communities  under  special  investi- 
gation is  obvious.  This  is  the  first  kind  of  knowledge 
to  be  sought  in  commercial  research. 

Markets  for  Special  Commodities.  As  has  been  said, 
business  facts  will  be  affected  by  the  character  of  the 
commodity  under  consideration.  The  same  holds  true 
for  market  analysis.  Those  facts  that  have  to  do  with 
the  actual  and  potential  demand  for  a  definite  commodity 
are  the  ones  to  be  sought  in  any  particular  investigation. 
Sometimes  there  is  a  very  definite,  clearly  defined  market 
for  a  given  product.  Take,  for  an  example,  the  case 
of  the  electric  iron.  This  is  a  household  utensil  which 
demands  a  certain  equipment  in  the  home.  Unless  the 
house  is  wired  for  electricity  and  attachments  are  avail- 
able, there  is  no  possible  market  for  this  electric  appli- 
ance. In  studying  the  market,  then,  for  this  commodity, 
the  beginning  of  the  investigation  will  be  found  in  the 
facts  dealing  with  the  extension  of  the  electric-light  plant. 
Barring  all  other  considerations  the  number  of  houses 
served  with  the  electric  current  will  afford  the  potential 
market  for  this  commodity. 

There  are,  also,  those  goods  which  have  a  very  definitely 
limited  demand.  One  would  not  expect  to  sell  more  than 
one  washing  machine  to  a  family  establishment.  There 
are  other  commodities  whose  demand  is  affected  by  forces 
quite  apart  from  tlie  product  itself.  There  is  the  case 
of  steam  excavators.  A  study  of  the  commercial  prob- 
lems connected  with  this  machine  reveals  the  fact  that 
the  demand  for  it  is  very  greatly  affected  by  general  trade 
conditions  throughout  the  country.  Tlic  influence  is  two 
or  three  points  removed  from  the  actual  macliine  itself, 
but  is  nevertheless  most  powerful.     Steam  excavators  are 


CHARACTER  OF  BUSINESS  FACTS        145 

used  largely  in  public  improvements  where  trenches  are 
to  be  dug  for  drainage  or  for  putting  in  a  sewage  system, 
or  other  conduits  under  streets.  These  projects  must  be 
financed  by  the  sale  of  bonds  of  municipalities  or  other 
political  units.  If  trade  conditions  are  bad  and  money 
is  hard  to  get,  such  improvements  will  be  postponed  to  a 
more  convenient  season.  The  market  for  public  bonds, 
therefore,  is  the  barometer  of  the  market  for  steam  exca- 
vators for  such  purposes  as  these. 

Other  connections  in  the  market  are  even  more  far 
reaching  than  this.  It  has  been  said  that  the  market  for 
silver  depends  to  a  substantial  extent  upon  the  climatic 
conditions  of  India.  The  reasoning  in  this  case  runs 
about  as  follows :  India  offers  a  great  open  market  for 
silver  both  for  the  purpose  of  coining  the  standard  Indian 
money,  the  rupee,  and  for  personal  ornaments.  Both  of 
these  demands,  however,  fluctuate  with  the  purchasing 
power  of  the  people.  In  its  turn  this  purchasing  power 
depends  upon  the  amount  of  surplus  products  for  sale  as 
exports,  and  lastly,  the  surplus  products  depend  upon 
the  climatic,  seasonal  conditions  throughout  the  country. 
Or,  take  a  case  nearer  home.  There  are  the  large  bakers 
in  the  American  cities  whose  duty  it  is  from  day  to  day 
to  foresee  the  fluctuating  demand  for  bread.  It  is  said 
that  these  men  are  able  to  determine  to  an  almost  uncanny 
degree  of  accuracy  what  the  demand  for  loaves  of  bread 
will  be  within  the  next  forty-eight  hours.  The  factors 
that  enter  into  their  calculation  are  weather,  tempera- 
ture, social  events,  and  many  other  less  tangible  influ- 
ences. 

An  interesting  incidence  of  such  far-reaching  influence 
was  revealed  by  the  war  conditions.  American  experts  on 
the  battlefields  of  France  received  daily  by  cable  an  ac- 


146  COMMERCIAL  RESEARCH 

curate  account  of  weather  conditions  in  the  United  States. 
Upon  the  basis  of  these  reports  and  those  received  from 
other  regions  of  the  world  the  commanders  of  the  allied 
armies  were  able  to  plan  their  artillery  and  aeroplane 
manoeuvers  for  a  considerable  period  in  advance.  It  is 
argued  that  the  weather  conditions  in  the  United  States 
will  predetermine  the  weather  conditions  in  Europe  two 
or  three  days  hence.  Such  influences  as  these  are  anal- 
ogous to  market  influences.  Investigations  should  isolate 
such  factors  and  evaluate  their  eff'ect. 

In  securing  facts  about  the  market  it  must  be  kept  in 
mind  that  these  facts  are  of  no  value  except  for  use  in 
more  intelligent  business  management.  Generally  busi- 
ness data  will  have  a  meaning  for  a  special  use.  It  is  the 
duty  of  the  one  engaged  in  research  to  select  the  proper 
data  for  this  special  purpose.  Every  commodity,  for 
example,  has  its  special  market.  The  facts  that  are  made 
available  should  bear  upon  this  particular  market  de- 
mand. 

Direction  of  Expenditure.  Sum  totals  of  expenditures 
are  not  intelligible  for  business  management  unless  these 
totals  have  been  broken  up  into  portions  small  enough 
and  definite  enough  to  reveal  the  direction  which  the  ex- 
penditures take.  Many  studies  have  been  made  bearing 
upon  the  question  of  the  family  budget.  These  investiga- 
tions have  had  as  their  primary  purpose  to  discover  what 
portion  of  the  entire  purcliasing  power  is  directed  toward 
the  necessaries  of  life,  toward  luxuries,  education,  amuse- 
ment, and  so  on.  Attempts  have  been  made  to  find  what 
percentage  of  expenditure  is  devoted  to  rent,  fuel  and 
light,  clothing,  food  and  sundries.  A  considerable  amount 
of  material  has  been  collected  by  the  Massachusetts  Com- 
mission appointed  to  study  the  cost  of  living  in  that  state. 


CHARACTER  OF  BUSINESS  FACTS        14.7 

The  following  summary  is  taken  from  their  report  of 
1910:  "It  would  be  safe  to  deduce  from  these  tables  a 
few  generalizations  about  the  expenditure  of  the  income 
of  a  working  man's  family  under  normal  conditions.  For 
weekly  incomes  of  from  $12.00  to  $18.00  the  income 
would  usually  be  spent  as  follows:  Rent,  18%  to  20%; 
fuel  and  light,  5%  ;  Clothing,  14%  ;  Food,  43%  to  45%  ; 
Sundries  15%  to  17%.  This  analysis  may  not  actually 
fit  the  expenditures  of  many  families,  but  it  would  prob- 
ably be  found  that  normal  families  with  incomes  of  the 
amounts  stated  tend  to  approach  these  figures." 

Most  of  these  investigations  into  the  direction  of  ex- 
penditure are  based  upon  a  slight  structure  of  precise 
facts.  They  are  generally  very  broad  generalizations 
from  meager  data.  As  an  example  of  such  business  facts 
the  following  quotation  is  given :  "  A  table  of  annual  ex- 
penditures on  luxuries  in  this  country  has  been  put  forth 
by  Dr.  Charles  W.  Eliot.  Like  evei-ything  coming  from 
him,  it  is  worth  thought.     Here  are  some  of  the  items: 

Tobacco    $1,200,000,000 

Jewelry  and  plate 800,000,000 

Confectionery     200,000,000 

Tea  and  coffee 100,000,000 

Chewing  gum 13,000,000 

Intoxicating  liquors 2,200,000,000 

We  might  be  giving  more,  but  the  typewriter  on  which  we 
were  recording  these  figures  developed  paralysis  while 
writing  the  sum  spent  on  booze."      {Collier^s  Weekly.) 

Facts  of  the  kind  illustrated  by  the  above  examples,  no 
matter  how  many  small  errors  they  may  contain,  are 
nevertheless  of  importance  in  showing  tendencies.  Most 
economic  laws  cannot  go  farther  than  tJie  demonstration 
of  a  general  tendency.     In  market  analysis,  it  is  the  broad 


148  COMMERCIAL  RESEARCH 

influence  that  counts  in  the  long  run.  For  instance,  the 
manufacturer  to-day  must  take  into  consideration  the 
nation-wide  movement  for  prohibition.  What  will  be  the 
effect  of  this  movement  upon  his  industry?  Experience 
has  shown  that  in  many  localities  where  consumption  of 
liquor  has  decreased,  the  demand  for  candy  and  chewing 
gum  has  increased.  What  other  effects  are  brought  about 
by  such  a  radical  movement.?  In  identifying  the  influ- 
ences of  such  movement,  the  study  of  the  direction  of 
expenditure,  the  construction  of  family  budgets,  and  any 
other  facts  which  show  buying  tendencies  will  be  of  service. 
Business  Habits.  Quite  apart  from  the  actual  posses- 
sion of  purchasing  power  is  the  subject  of  how  that  pur- 
chasing power  will  be  exerted.  One  avenue  to  this  kind 
of  knowledge  is  through  the  study  of  business  habits  in 
any  given  community.  The  manufacturer  and  merchant 
know  that  there  is  a  very  important  element  of  passive- 
ness  or  inertia  in  every  market.  They  understand  very 
clearly  in  these  days  that  men  in  their  buying  habits  are 
in  one  respect  like  sheep ;  they  follow  certain  leaders. 
This  is  generally  expressed  by  saying  that  every  market 
follows  certain  trade  leaders.  The  great  mass  of  people 
do  not  make  up  their  minds  for  themselves,  independently, 
but  either  consciously  or  unconsciously  imitate  those  who 
hold  a  position  of  prominence  and  leadership  in  the  com- 
munity. One  object  in  market  investigations  should  be 
to  identify  these  "  pivotal  men,"  who  set  the  standards 
for  their  group.  A  study  of  these  trade  leaders  who  fix 
the  method  of  buying  in  any  community  will  reduce  the 
expenses  of  the  investigation  and  secure  the  vital  and 
essential  facts  which  show  the  direction  which  expenditure 
is  taking.  These  facts  should  enable  the  manufacturer 
or  merchant  to  adapt  his  goods  and  commercial  practices 


CHARACTER  OF  BUSINESS  FACTS        149 

most  advantageously  to  the  habits  of  that  group.  It  is 
important  to  know,  for  example,  whether  the  typical  buyer 
in  a  neighborhood  makes  his  purchases  in  bulk  or  pack- 
age goods,  and  why?  It  is  possible,  of  course,  through 
years  of  training,  and  by  a  large  expenditure  of  money 
for  advertising,  to  change  the  bu^'ing  habits  of  a  large 
number  of  people.  American  manufacturers  who  expend 
millions  of  dollars  in  national  advertising  are  accustomed 
to  dominate  their  markets  by  sheer  force  of  persistent  ap- 
peal. This  is  certainly  an  expensive  way  to  sell  goods 
and  is  generally  the  result  of  an  ignorance  of  actual  buy- 
ing habits. 

One  large  newspaper  that  has  carried  on  an  extensive 
analysis  of  the  market  which  it  covers  to  be  able  to  tell 
the  buying  habits  of  all  the  people  in  this  community.  It 
is  able,  it  says,  to  "  put  its  fingers  on  the  one  hundred 
and  one  items  of  knowledge  that  determine  why  people 
buy  and  why  they  don't."  ("  Winning  a  Great  Market 
on  Facts,"  p.  2.)  The  Merchandising  Service  Depart- 
ment of  this  newspaper  boldly  asserts  that  it  possesses  the 
facts  wliich  show  how  many  people  buy  at  neighborhood 
stores,  how  many  make  tlieir  purchases  from  the  downtown 
stores,  and  how  these  people  are  influenced  in  making  these 
purchases. 

Another  investigation  that  covered  a  large  part  of  the 
United  States  has  led  to  certain  conclusions  as  to  the 
general  buying  habits  in  certain  commercial  sections. 
It  claims  that  the  commercial  map  of  the  United  States 
would  be  far  different  from  the  sections  for  census  pur- 
poses. There  is,  for  example,  a  Yankee  market  in  the 
East  which  is  characterized  by  close  shopping  even  among 
the  women  buyers  who  have  plenty  of  money  to  spend. 
The  demand  in  such  a  section  is  for  a  conservative  type 


150  COMMERCIAL  RESEARCH 

of  merchandise  which  must  offer  good  values  at  moderate 
prices.  In  contrast  to  this  is  the  great  metropolitan 
market  of  New  York  City,  where  there  are  the  most  ex- 
pensive displays  in  the  United  States.  Here  goods  are 
sold  on  the  basis  of  style  or  quality  rather  than  price. 
There  are  the  manufacturing  and  mining  communities 
scattered  throughout  the  country  which  in  buying  habits 
are  in  contrast  with  the  general  agricultural  communities. 
In  the  former  there  is  an  element  of  suspicion  and  distrust 
which  does  not  appear  in  the  latter.  There  is  also  the 
Southern  section  which  has  its  own  peculiar  commercial 
characteristics.  The  old  attitude  of  the  cotton  planters 
with  its  generous  tolerance  and  ready  trustfulness  has 
never  wholly  disappeared.  But  there  are  certain  spots 
even  in  that  region  which  show  sharp  contrasts.  The 
Piedmont  district  in  western  North  Carolina,  for  illus- 
tration, has  all  the  cautious  buying  of  the  Yankee  market 
and  all  the  suspicion  of  the  manufacturing  and  mining 
communities.  There  is  a  sharp,  well-defined  individualistic 
attitude  in  this  region  which  sets  it  off  from  all  the  sur- 
rounding communities. 

There  arc  many  intangible  elements  that  go  into  the 
forming  of  buying  habits.  The  students  of  social  prob- 
lems have  given  to  these  indefinable  elements  a  general  term 
of  "  mores."  Every  community  that  feels  any  solidarity 
of  interest  or  that  looks  upon  itself  as  in  any  sense  a 
unit  will  begin  to  form  characteristic  liabits  of  living;  its 
own  individual  set  of  values  will  begin  to  form  the  basis 
of  a  tradition  which  will  be  handed  down  from  one  genera- 
tion to  another.  When  one  approaches  a  subject  of  this 
sort  he  is,  of  course,  delving  into  questions  that  are  very 
largely  psychological.  Nevertheless,  the  progressive 
manufacturer   and   merchant   must   include    this   subject, 


CHARACTER  OF  BUSINESS  FACTS        151 

also,  in  the  realm  of  his  investigation.  Buying  habits  are 
a  part  of  commercial  research. 

The  Will  to  Buy.  Back  of  the  wealth  of  a  community 
and  beyond  its  business  habits  is  the  individual  will  to  buy 
or  to  refuse  to  buy  goods.  Every  merchant  and  every 
manufacturer  must  secure  the  consent  of  this  individual 
will  before  a  transaction  is  completed.  Sometimes  it  is 
remarkably  easy ;  often  it  is  extremely  difficult.  The 
most  important  point  is  to  know  whose  will  controls  in 
the  buying.  This  is,  to  be  sure,  largely  a  psychological 
problem,  also,  and  can  be  learned  only  vaguely  and  by 
estimates.  There  act,  however,  on  every  given  individual 
complex  influences  in  regard  to  purchases.  There  are 
generous  impulses,  and  there  are  the  apprehensions  and 
fears  as  to  future  welfare  to  be  considered.  Since,  in  the 
market  of  this  country,  the  general  buying  unit  is  the 
family,  and  since  in  the  family  the  decision  rests  very 
largely  with  the  parents,  it  is  clear  that  their  will  to  buy 
or  not  to  buy  will  in  most  cases  control.  This  fact  has 
been  realized  in  a  number  of  investigations  made.  One 
popular  magazine  analyzed  a  number  of  automobile  sales 
with  a  view  to  learning  whose  influence  was  most  impor- 
tant in  making  the  purchase.  Five  hundred  and  twenty- 
four  such  sales  were  investigated.  The  figures  lead  to 
the  conclusion  that  in  "  80.5%  of  the  instances  in  which 
the  '  woman's  say  '  is  indicated,  the  wife  wielded  a  potent 
influence."  Such  a  conclusion  is  obviously  vague  and  in- 
definite. It  may  be  possible,  however,  to  learn  something 
by  this  means.  In  any  case,  it  is  extremely  important  to 
recognize  the  fact  that  there  is  a  will  which  controls  in 
every  purchase  made. 

In  the  textile  line  it  is  now  generally  agreed  that  the 
woman  in  the  family  is  the  leading  spirit  in  the  making  of 


152  COMMERCIAL  RESEARCH 

purchases.  "  Woman  is  a  shopper,"  says  one  writer 
on  this  subject,  "  hence  the  department  store.  In  the 
household  the  man  makes  the  money  and  the  woman  spends 
it."  If  this  position  is  correct,  the  appeal  must  be  made 
to  the  women  of  the  country.  This  will  differ  very  ma- 
terially from  the  appeals  which  are  made  to  men.  The 
American  woman  is,  generally  speaking,  a  keen  and  in- 
telligent shopper  and  is  becoming  better  informed  from 
year  to  year.  It  is  also  probably  true  that  as  her  abil- 
ity increases,  her  responsibility  and  control  in  the  making 
of  purchases  increase.  Whatever  the  facts  are,  the  im- 
portant point  is  to  know  that  here  is  an  element  which 
demands  careful  consideration. 

In  the  case  of  the  children  in  the  American  family, 
their  purchases  are  very  largely  controlled  by  the  judg- 
ment and  will  of  the  parents.  It  is  true,  however,  that 
conditions  in  the  United  States,  even  in  this  respect,  differ 
greatly  from  conditions  abroad.  With  an  increase  in 
general  purchasing  power  there  comes  a  more  liberal  atti- 
tude on  the  part  of  parents  and  a  greater  freedom  of 
choice  for  the  children.  Very  often  definite  allowances 
are  given  to  the  children  which  they  may  use  in  any  way 
they  desire.  It  is  well  known  that  certain  fads  sweep  over 
the  country  with  remarkable  speed.  The  children  in  very 
wide  districts  will  take  up  a  certain  game  and  will  influ- 
ence their  parents  to  make  the  necessary  purchase  of  toys 
and  other  equipment.  Examples  of  these  movements  may 
be  seen  in  bicycles,  coasters,  jackstraws,  or  roller  skates. 
In  matters  of  this  kind,  of  course,  the  will  of  the  children 
may  frequently  prevail  in  the  buying.  The  facts  bearing 
upon  this  element  of  merchandising  should  be  collected 
and  analyzed.  It  is  a  part  of  commercial  research  to  dis- 
cover all  of  these  intangible  elements  and  to  evaluate  them. 


CHARACTER  OF  BUSINESS  FACTS        153 

Potential  Markets.  In  a  country  where  the  purchasing 
power  is  increasing  rapidly,  as  is  true  of  the  United  States, 
there  will  be  potential  markets  of  many  kinds  to  be  ana- 
lyzed. No  American  business  man  who  is  in  any  sense 
progressive  is  satisfied  with  the  amount  of  business  that 
he  is  doing.  He  is  constantly  seeking  new  fields  in  order 
that  he  can  enlarge  his  plant  or  store  and  increase  the 
volume  of  business  from  year  to  year.  A  study  of  busi- 
ness facts  gathered  from  reliable  sources  and  covering 
a  sufficiently  large  field,  will  enable  him  to  form  the  best 
possible  judgment  as  to  the  method  which  he  should  use 
in  securing  this  end.  Investigations  with  this  point  in  view 
have  been  made  by  certain  popular  magazines  that  desire 
to  convince  prospective  advertisers  of  the  fact  that  their 
pages  offer  the  best  advertising  medium. 

Such  an  investigation  has  been  made  of  the  possible 
farm-tractor  market.  It  was  assumed  that  no  farm  of 
less  than  one  hundred  acres  could  afford  this  type  of 
farm  machinery.  From  the  census  report  it  was  possible 
to  learn  the  numbers  of  farms  in  the  country  of  one  hun- 
dred acres  and  up  to  one  hundred  and  seventy-four  acres. 
There  was  also  another  division  of  farms  covering  the 
group  above  one  hundred  and  seventy-five  acres.  The 
first  group  constituted  24%  of  the  farms  in  the  country; 
the  latter  included  18%.  It  was  assumed  that  one  out 
of  every  five  of  the  former  group  offered  a  potential  mar- 
ket for  a  farm  tractor.  Of  the  latter  group  three  out 
of  five  should  afford  a  potential  market.  In  addition  to 
this  some  of  the  larger  farms,  it  was  assumed,  would 
have  need  of  two  tractors.  The  sum  total  of  these  three 
groups  constituted,  then,  the  entire  market  in  the  United 
States  for  a  farm  tractor.  It  was  then  possible  to  learn 
from  various  sources  the  number  of  tractors  sold  during 


154  COMMERCIAL  RESEARCH 

the  preceding  year.  The  difference  between  this  number 
and  the  sum  total  reached  above  made  up  the  potential 
market  for  the  manufacturer.  It  is  clear  that  facts  of 
this  character  are  estimates  and  not  precise  facts.  There 
is  furnished,  however,  an  ideal  or  standard  toward  which 
to  work  and  also  a  basis  upon  which  sales  plans  may  be 
made.  Certainly  a  more  complete  knowledge  of  market 
demand  would  greatly  help  in  the  adjustment  of  supply 
and  should  reduce  to  a  minimum  the  goods  left  on  the 
shelves  or  in  the  storeroom.  One  duty  of  commercial  re- 
search is  to  examine  this  problem  of  potential  markets. 

The  Effect  of  Nationality.  Another  type  of  problem 
that  arises  in  commercial  research  is  that  of  nationality. 
There  is  in  the  United  States  a  great  conglomeration  of 
various  nationalities,  some  of  them  definitely'  isolated  in 
groups  and  others  intermingled.  At  the  present  time 
there  are  vast  numbers  of  foreign  born  who  have  brought 
from  their  native  land  the  personal  habits,  tastes,  and 
standards  of  living  to  which  they  were  accustomed.  Since 
many  of  them  had  reached  maturity  before  emigrating  to 
the  United  States,  it  is  a  very  difficult  and  expensive  prob- 
lem to  attempt  to  change  these  characteristics.  The 
manufacturer  or  merchant  will  seek  to  adapt  his  goods 
to  their  requirements.  A  German  community,  for  ex- 
ample, will  differ  in  many  respects  from  a  Jewish,  Irish, 
or  Scotch  community.  A  visit  to  the  public  markets  in 
any  large  city  like  Chicago  or  New  York  will  reveal  the 
fact  that  communities  retain  the  habits  which  they  have 
formed  in  the  foreign  countries.  This  applies  not  only 
to  the  kind  of  commodity  handled,  but  also  to  the  form 
which  it  takes.  Commercial  research  must  examine, 
through  a  knowledge  of  facts,  the  conditions  that  are 
modified  by  the  effect  of  nationality. 


CHARACTER  OF  BUSINESS  FACTS        155 

Miscellaneous  Factors.  Besides  the  specific  elements  in 
the  market  which  have  been  discussed  here,  there  are  many 
others  of  more  or  less  influence.  One  of  these,  for  exam- 
ple, is  the  geographical  conditions  which  affect  the  market 
area.  The  mountainous  region  will  naturally  differ  in 
many  respects  from  the  level  plain.  There  will  be,  for 
instance,  the  question  of  transportation ;  there  will  also 
be  the  question  of  climate.  A  country  like  the  United 
States  that  has  been  settled  in  a  more  or  less  haphazard 
way  will  necessarily  have  developed  many  small  pockets 
of  trade,  which  need  to  be  sought  out  by  the  commercial 
investigator.  There  will  be  remnants  of  an  old  regime, 
traditional  business  habits  and  customs,  obsolete  trade 
organizations  that  will  need  to  be  taken  into  considera- 
tion. Habits  in  business  persist  long  after  they  have 
ceased  to  be  economical. 

The  factors  in  market  analysis  increase  with  an  in- 
creased knowledge  of  the  market.  One's  judgment  must 
be  his  best  guide  in  directing  any  particular  investigation. 
A  number  of  factors  have  already  been  discussed,  a  few 
others  may  be  mentioned.  There  is  the  question  of  lit- 
eracy among  the  people.  Some  American  manufacturers 
have  tried  to  carry  the  method  of  advertising  which  they 
used  in  the  United  States  to  South  America.  But  they 
failed  to  consider  one  vital  factor  which  distinguishes  that 
market  from  the  home  market.  In  some  South  American 
countries  95%  of  the  people  are  illiterate.  Written  ad- 
vertisements pass  them  hy.  There  is  also  the  question  of 
dealer  cooperation  which  may  affect  the  demand  for  com- 
modities. Many  manufacturers  inquire  about  the  number 
of  people  in  a  given  district  who  own  their  homes ;  others 
want  to  know  whether  the  cities  are  manufacturing  cen- 
ters or  jobbing  centers,  and  what  the  dominating  indus- 


156  COMMERCIAL  RESEARCH 

try  is.  The  mining  community  would  differ  from  the 
manufacturing  community,  as  it,  in  turn,  would  differ 
from  the  agricultural  region  or  the  lumbering  district. 
As  a  matter  of  fact  there  is  no  limit  to  the  character  of 
the  demand  which  should  be  studied  by  one  engaged  in 
commercial  research.  Every  characteristic  of  human 
nature  may  find  expression  here.  Many  of  the  sciences 
may  contribute  facts  of  great  value.  The  only  limits  to 
an  investigation  of  this  kind  are  the  ability  and  the 
finances  of  the  investigator. 

It  may  be  said  in  concluding  the  discussion  of  market 
analysis  that  these  facts  fall  into  two  general  classes. 
There  are  the  facts  which  have  to  do  with  individuals. 
These  may  be  called  the  personal  facts.  The  other  class 
of  facts  has  to  do  with  everything  outside  of  purely  per- 
sonal matters.  The  latter  treat  of  tlie  general  environ- 
ment, geographical  and  otherwise,  the  climatic  conditions 
and  all  those  forces  outside  of  the  individual's  personality. 
On  both  of  these  phases  of  the  market  there  remains  much 
that  has  to  be  done  in  the  way  of  collecting  facts. 

Conclusion.  From  this  survey  of  the  character  of  busi- 
ness data  it  will  be  seen  that  facts  fall  into  two  general 
groups.  There  are  the  concrete  facts,  the  precise  figures 
representing  individual  units,  and  there  are  the  estimated 
values  which  are  based  upon  observation  and  the  judg- 
ment of  a  limited  number  of  individuals.  The  great  mass 
of  business  data  is  made  up  of  these  estimates.  Indeed, 
even  the  precise  figures  are  often  surcharged  with  human 
judgment.  Such  figures  are  made  to  carry  the  burden 
of  an  entire  group  that  has  not  been  individually  examined. 
It  has  well  been  said  that  the  proper  function  of  statistics 
is  to  enlarge  individual  experience.  This  statement  holds 
true  of  business  facts. 


CHARACTER  OF  BUSINESS  FACTS        157 

In  the  examination  of  these  facts,  whatever  their  char- 
acter, it  must  be  kept  in  mind  that  the  main  purpose 
sought  is  to  establish  workable  principles.  Facts  in  them- 
selves may  be  without  interest,  but  when  they  are  made 
to  establish  a  rule  of  conduct  or  a  business  policy  they 
become  of  vital  significance.  A  business  principle,  or  a 
business  policy  can,  however,  be  only  a  general  rule,  or, 
as  economists  call  it,  a  "  tendency."  Lawyers  claim  that 
the  extreme  of  the  law  is  injustice.  In  economic  inquiry, 
likewise,  the  general  rule  or  tendency  may  do  injustice  to 
the  individual.  It  is,  nevertheless,  necessary  to  discover 
this  general  tendency  and  to  define  the  laws  which  are  at 
work.  Only  upon  a  basis  of  this  kind  can  a  manufacturer 
or  a  merchant  direct  his  business  wisely  and  safely. 


CHAPTER  VI 

METHODS    OF    COLLECTING    BUSINESS    FACTS 

General  principles  —  Methods  of  collecting  —  Filing  cards  —  By 
mail  —  The  questionnaire  —  The  person  to  be  questioned  —  Collector 
of  data  —  The  document  itself  —  Suggestions  for  using  the  question- 
naire—  Investigating  on  basis  of  functions. 

One  should  never  lose  sight  of  the  primary  purpose  for 
which  business  facts  are  to  be  used.  If  they  are  to  be 
of  service  to  the  business  manager,  they  must  provide  him 
with  the  necessary  basis  for  forming  a  judgment,  for  de- 
veloping a  business  policy,  or  for  solving  the  problems  that 
arise  from  emergency  situations.  In  other  words,  the 
business  facts  are  accumulated  for  use.  Since  this  is  the 
case,  it  follows  naturally  that  the  methods  employed  in 
collecting  business  data  should  be  of  such  kind  as  to  make 
these  facts  available  for  use.  A  survey  will  here  be  made 
of  the  various  methods  which  may  be  employed  in  accumu- 
lating business  facts. 

General  Principles.  The  first  principle  for  guidance  in 
collecting  business  facts  is  that  these  facts  should  be  made 
intelligible.  Mere  records  may  be  no  better  than  ma- 
chines that  are  thrown  on  the  junk  heap.  In  this  case 
they  will  only  take  up  space  and  cumber  the  shelves. 
They  may  come  to  hand  on  neat  paper  and  in  good  style 
and  yet  be  worthless.  If  they  are  not  intelligently  col- 
lected, the  situation  is  almost  as  bad  as  if  they  are  not 
intelligently  used.  Much  is  being  said  in  these  days  of 
the  necessity  for  being  prepared  in  advance  of  the  emer- 

158 


COLLECTING  BUSINESS  FACTS  159 

gency.  The  first  law  of  preparedness  is  to  have  the  facts 
at  hand  and  available.  This  means  that  they  should  be 
collected  beforehand,  if  possible,  in  such  a  way  that  they 
may  be  adapted  to  serve  any  purpose.  Wherever  this  is 
true  the  method  of  collecting  should  be  carefully  examined, 
to  see  that  the  facts  are  intelligently  collected  and  made 
ready  for  instant  use.  This  will  fulfill  the  old  adage, 
"  In  time  of  peace  prepare  for  war." 

Not  only  must  the  facts  of  business  be  intelligible  when 
collected,  but  they  must  also  be  pertinent  and  of  an  essen- 
tial character.  It  is,  of  course,  not  always  possible  to 
know  what  will  be  needed  in  the  future.  The  character 
of  the  business,  however,  if  thoroughly  known,  will  be  a 
splendid  guide  in  the  selection  of  material.  No  method, 
however  clever,  will  take  the  place  of  good  judgment. 
There  is  need  of  judgmen-t  all  along  the  way.  It  is  pos- 
sible to  carry  the  matter  of  accumulating  data  and  of 
making  charts  and  graphs  to  such  an  extreme  as  to  be- 
come not  only  useless  but  ridiculous.  Some  libraries,  for 
example,  have  wasted  much  energy  in  keeping  a  check  on 
the  number  of  people  who  have  entered  the  building.  This 
is  not  of  any  essential  value  unless  the  purpose  of  their 
visit  is  known.  It  is  a  much  more  pertinent  question  to 
ask  why  people  have  come  than  to  ask  how  many  have 
come. 

It  may  be  extremely  important  to  have  a  time  clock  in 
order  to  show  when  the  sales  force  arrives  in  the  morn- 
ing, but  there  is  certainly  a  further  need  to  know  how  busy 
they  are  during  the  day.  In  some  cases  it  may  be  useful 
to  know  how  many  people  enter  the  store  within  a  given 
period,  but  it  is  certainly  far  more  essential  to  inquire 
at  what  times  they  are  concentrated  and  why.  The  labor 
force  on  the  pay  roll  must  be  able  to  take  care  of  the 


160  COMMERCIAL  RESEARCH 

peak  of  the  load.  This  means  that  the  sales  force  must 
take  care  of  all  customers  at  the  point  of  the  greatest 
sales.  It  will,  however,  be  a  great  loss  if  this  sales  force 
must  stand  idly  by  at  other  periods.  The  facts  which 
bear  upon  the  variability  in  the  number  of  customers 
who  enter  a  store  are  both  pertinent  and  essential.  It 
has  been  humorously  said  that  the  business  expert  is  em- 
ployed to  make  charts  to  show  how  many  girls  among  the 
sales  force  would  jump  out  of  the  window,  how  many  would 
go  down  the  fire  escape,  and  how  many  would  flee  down  the 
stairs,  in  case  of  fire.  This  is,  of  course,  a  grotesque  ap- 
plication of  the  use  of  business  facts. 

In  order  that  these  facts  shall  be  pertinent  and  essential, 
they  must  be  specific  and  reliable.  A  mere  guess  or  a 
mere  opinion  without  a  possibility  of  definite,  concrete 
data  is  not  enough.  The  constant  query  should  be, 
"  What  are  the  facts  ?  "  This  inquiry  should  go  far 
enough  to  locate  the  sources  of  data  in  order  that  one  may 
know  how  reliable  they  are.  Business  facts  may  be  either 
first  hand  or  second  hand.  To  judge  them  one  must  know 
how  far  removed  they  are  from  their  original  source.  The 
general  rule  to  be  followed  is  that  one  should  reach  back  as 
near  to  the  real  source  as  possible  in  collecting  data. 
Otherwise,  one  is  likely  not  to  be  able  to  realize  the  ideal 
of  business  research,  which  is  to  represent  the  business 
as  it  is. 

The  facts  that  are  being  collected  should  also  be  com- 
prehensive. However  difficult  a  matter  it  is  to  follow  the 
narrow  trail  between  too  much  and  too  little,  it  is  neces- 
sary to  make  the  attempt  in  collecting  business  data. 
Naturally,  it  will  always  be  wise  to  err  on  the  side  of  too 
much  rather  than  on  the  side  of  too  little.  As  a  matter 
of  fact,  unexpected  uses  of  the  material  are  to  be  expected. 


COLLECTING  BUSINESS  FACTS  161 

"  What  were  our  sales  last  year  for  March  in  Ohio?  "  the 
sales  manager  asks  suddenly  one  morning.  If  the  data  are 
available,  the  material  out  of  which  the  solution  of  the 
problem  must  come  is  there  at  hand.  If  the  material  must 
be  collected,  then  much  precious  time  may  be  lost.  Indeed, 
the  situation  may  change  entirely  before  the  facts  can  be 
known.  Or  again,  the  business  manager  may  inquire, 
"  How  has  this  product  sold?  "  The  records  must  appear 
at  once  in  answer  to  the  query.  If  they  do  not,  the  system 
is  not  sufficiently  comprehensive.  "  What  is  the  matter 
up  in  Jones'  territory?"  asks  a  sales  manager.  Again 
the  material  should  be  at  hand  in  order  to  afford  an  answer 
to  the  query. 

The  statistician  for  a  large  manufacturer  of  grain 
products  had  the  problem  of  furnishing  all  required  in- 
formation to  explain  the  fluctuations  in  the  price  of 
corn.  In  order  to  equip  himself  for  this  service,  he  traced 
the  history  of  corn  in  the  market  from  1869  up  to  date. 
The  price  was  charted  3'ear  by  year  and  the  causes  for 
all  material  changes  were  sought  out.  The  record  was 
then  kept  up  to  the  minute  from  market  quotations.  On 
the  basis  of  this  material  it  was  possible  to  form  a  sound 
judgment  on  most  of  the  questions  that  arose.  This  ma- 
terial was  then  thrown  into  the  form  of  an  algebraic  equa- 
tion which  showed  the  influence  of  all  the  diff'erent  factors 
aff'ecting  the  price  of  this  grain.  Whenever  there  was  a 
change  in  any  given  factor,  it  was  at  once  registered  in  the 
mathematical  equation.  Such  a  system  as  this  proved 
very  practical  when  the  times  were  uncertain  and  when  it 
became  necessary  to  forecast  the  future.  No  one  can 
foresee  the  future  more  clearly  or  more  successfully  than 
he  who  has  studied  carefully  the  records  of  the  past. 

Another  large  manufacturing  concern  keeps  the  essen- 


162  COMMERCIAL  RESEARCH 

tial  data  of  its  business  also  in  the  form  of  an  equation 

Net  Profits  Gross  Profits  —  Expenses 

%  Profits  =        = — 

Investment  Merchandise  -|-  Receivables 

$  96,000  —  $  75,000 

15.3  % 


$375,000  -f  $100,000 


Whenever  there  are  changes  affecting  any  part  of  this 
formula,  they  are  at  once  recorded,  and  the  policy  of  the 
company  is  adjusted  to  care  for  it.  In  this  way  it  is  pos- 
sible to  cover  most  of  the  important  phases  of  any  given 
business.  When  a  market  is  more  than  local  the  task  is 
greatly  increased.  Nevertheless,  the  aim  should  be  to 
make  the  facts  cover  the  problem.  Unless  they  are  com- 
prehensive, some  essential  things  may  be  omitted. 

Another  principle  to  keep  in  mind  in  collecting  business 
facts  is  that  these  facts  should  be  immediately  available. 
In  modern  business  it  is  the  sure,  quick  action  that  counts. 
In  preparing  a  defense  against  the  enemy,  the  fuse  must 
be  laid  long  before  the  enemy  approaches.  When  he  is 
before  the  gates,  it  is  then  too  late  to  prepare  the  mine  or 
to  lay  the  fuse.  The  same  is  true  in  business.  Many 
problems  will  not  wait  for  the  necessary  data  to  be  col- 
lected. The  business  man  is  doubly  defended  who  is  fully 
prepared.  Most  accountants  know  full  well  what  quick 
demands  for  business  facts  are.  The  most  unexpected 
things  are  asked  of  him  and  he  must  produce  the  facts. 
This  can  only  be  done,  of  course,  where  the  facts  are  quite 
fully  analyzed  as  they  are  recorded.  It  will  be  a  great 
help,  therefore,  in  making  the  material  available  if  there  is 
full  cooperation  among  many  departments.  No  single  de- 
partment can  possibly  accumulate  or  fully  analyze  the  ma- 
terial  for  the  entire   business.     The   next  best    thing  to 


COLLECTING  BUSINESS  FACTS  163 

knowing  the  facts  themselves  is  to  know  exactly  where  they 
may  be  found.  Somebody  in  every  business  establishment, 
if  he  does  not  know  the  facts  themselves,  must  know  who 
will  know  these  facts. 

In  these  days  of  extreme  complexity  of  business  there 
is  need  of  much  anticipation  as  to  the  effects  of  various 
changes.  The  manager  who  can  see  farthest  and  most 
clearly  is  the  manager  with  a  distinct  advantage.  Antici- 
pation of  needs  means  a  thorough  knowledge  of  business. 
This  knowledge  should  be  not  only  general,  but  also  spe- 
cific and  flexible.  Knowledge  is  not  known  for  its  own 
sake,  but  in  order  that  it  may  become  useful,  may  become 
business  wisdom.  One  large  firm  desired  to  know  more 
about  its  own  affairs  in  order  that  it  might  do  business 
more  intelligently.  For  this  purpose  alone  it  had  need  of 
a  man  expert  in  business  research.  But  further  than  this, 
it  desired  a  man  who  would  have  the  facts  of  this  business 
at  his  fingers'  tips,  so  that  he  would  be  able  to  answer 
instantly  all  public  misstatements  regarding  this  business. 
The  company  had  often  felt  that  its  good  will  was  injured 
because  these  misstatements,  which  appeared  in  public 
print,  remained  unanswered.  This  is,  of  course,  only  one 
of  many  reasons  for  having  the  business  facts  immediately 
available  for  every  call. 

Methods  of  Collecting.  A  discussion  of  the  methods  of 
collecting  business  facts  assumes  that  all  the  sources  have 
been  fully  canvassed.  If  the  material  is  now  at  hand  or 
is  being  accumulated,  from  these  various  sources,  how  is  it 
to  be  recorded?  In  the  first  place,  the  methods  must  ful- 
fill the  requirements  stated  above.  These  facts  must  be 
made  intelHgible,  they  must  be  pertinent  and  essential,  they 
must  be  comprehensive  in  character,  and  they  must  be 
instantly   available.     A  large  part  of  the   responsibility 


164  COMMERCIAL  RESEARCH 

for  securing  these  desired  results  rests  with  him  who 
determines  the  methods  of  collecting  the  data. 

In  collecting  business  facts  there  are  two  main  problems. 
These  fall  into  two  groups  on  the  basis  of  the  general 
source  of  the  facts.  There  are  what  might  be  called  the 
internal  data  of  the  business.  These  are  the  facts  that 
are  secured  from  one's  own  records.  If  these  records  of 
original  entry  are  kept  in  the  intelligent  manner  which 
should  characterize  them,  the  problem  will  not  be  a  diflS- 
cult  one.  It  is  not  likely,  however,  that  these  records  will 
afford  material  that  is  sufficiently  comprehensive.  How- 
ever essential  and  pertinent  the  facts  from  these  sources 
may  be,  they  are  by  nature  narrow  in  scope.  It  is  always 
possible  to  control  the  sources  of  this  kind  of  material  and 
to  make  any  modifications  that  seem  necessary  in  the  case. 

The  other  division  of  business  facts  may  be  called  the 
external  data.  These  are  secured  from  people  outside  of 
the  immediate  business  organization.  Clearly,  the  prob- 
lem here  is  a  far  different  one  from  that  of  securing  facts 
from  one's  own  records.  In  this  case  one  cannot  control 
the  source  of  material  and  one  must  rely  upon  another's 
will  to  secure  it  at  all.  The  character  of  the  facts  and  the 
scope  of  the  data  will  here  depend  upon  the  method  of 
collecting  and  willingness  of  others  to  give  out  the  facts. 
The  chief  problem  connected  with  methods  of  collecting 
business  facts,  therefore,  will  rise  from  this  second  group. 

Filing  Cards.  There  has  been  a  very  extensive  develop- 
ment recently  in  the  use  of  filing  systems.  There  are  to- 
day many  of  these  systems  differing  in  minor  respects,  but 
all  very  effective  in  furnishing  a  convenient  method  of 
preserving  data.  It  is  not  the  intention  here  to  describe 
any  system  in  detail,  but  merely  to  suggest  the  possibility 
of  using  a  method  of  this  kind  to  record  the  facts  which 


COLLECTING  BUSINESS  FACTS  165 

may  be  of  service  in  research  work.  There  are  several 
books  that  have  been  published  on  the  subject  of  filing  and 
of  card  indexes  which  will  explain  the  advantages  and  dis- 
advantages of  the  various  systems.  By  some  such  method 
as  filing  cards,  it  is  possible  to  condense  very  greatly  the 
business  data  which  are  to  be  analyzed.  Sometimes  these 
small  cards  will  carry  an  astonishing  amount  of  material. 
With  sufficient  skill  it  might  be  possible  to  write  a  life  his- 
tory of  a  business  on  one's  thumb  nail.  The  use  of  filing 
cards  seems  to  be  a  striking  instance  of  this  condensation. 
Many  businesses  have  made  extensive  use  of  filing  sys- 
tems. In  certain  large  mail-order  houses,  for  example, 
"  the  names  of  from  four  to  six  million  customers  are  con- 
tained in  a  card  index.  That  is,  so  to  speak,  the  very 
heart  of  the  business,  and  this  card  index  is  being  contin- 
ually corrected  and  kept  up  to  date.  It  shows  what  the 
customer  has  bought  from  the  beginning,  whether  he  is  the 
head  of  the  family  —  and  sometimes  the  other  members  of 
the  family  —  how  long  he  has  lived  at  the  address  given, 
and  any  other  information  obtainable  that  is  of  value  in 
dealing  with  him.  To  this  list  which  is  carefully  guarded 
the  wonderful  catalogues  which  describe  the  goods  offered 
are  sent  out  by  mail."  (T.  H.  Price,  "  The  Outlook," 
January  26,  1916,  p.  230.)  Many  life-insurance  com- 
panies keep  a  very  careful  card  index  of  the  holders  of 
their  policies  and  of  prospective  customers.  Anything  re- 
garding them  that  may  be  of  use  to  the  insurance  company 
is  recorded  on  these  cards.  The  files  thereby  become  great 
storehouses  of  information,  held  in  reserve  for  instant 
available  use.  Even  some  rural  retail  stores  have  installed 
a  system  of  filing  cards  which  carry  much  valuable  infor- 
mation about  the  people  in  the  countryside  where  they  are 
located.     An  English  poet  was  compelled  to  go  to  the 


166  COMMERCIAL  RESEARCH 

church  records  of  births,  deaths,  and  marriages  in  order  to 
find  the  life  histories  of  the  people  in  the  community. 
This  material,  that  always  ended  in  a  tragedy,  was  woven 
together  into  a  classic  poem.  In  the  United  States  it 
would  be  possible  to  secure  material  of  this  sort  from  the 
card-index  systems  of  many  progressive  merchants. 

The  possibilities  for  a  method  of  this  sort  are  practi- 
cally unlimited.  Suppose  a  merchant  in  a  small  town 
would  begin  to  record  the  history  of  the  retail  establish- 
ments in  his  community.  It  would  be  astounding  the 
amount  of  wisdom  which  might  be  gleaned  from  many  un- 
happy experiences.  One  dealer,  for  example,  keeps  on 
record  all  the  happenings  in  his  community  which  directly 
affect  his  business.  He  can  turn  immediately  to  the  card 
that  will  show  the  kind  of  weather,  in  his  community  at 
any  given  date.  Such  facts  may  be  quite  immaterial  in 
genera],  and  yet  on  certain  occasions  they  have  proved 
to  be  of  great  practical  importance  to  this  man.  How 
far  records  should  be  carried  is  once  more  a  matter  of 
individual  judgment.  Experience  will  be  the  best  guide 
in  this  matter. 

A  few  principles  may  be  stated  to  direct  one  in  the  use 
of  the  card  index.  These  rules  must  of  necessity  be  very 
general  in  character.  They  should,  however,  summarize 
the  experience  of  those  who  have  made  use  of  this  method. 

(a)  The  essential  point  in  the  keeping  of  records  by 
filing  cards  is  to  get  all  the  desirable  data  in  a  compact, 
intelligible  form.  The  system  can  be  controlled  com- 
pletely. It  is  flexible;  it  is  adjustable;  it  may  be  made 
self-clearing;  it  can  be  kept  up  to  the  minute.  In  detail 
the  system  can  go  as  far  as  time  and  returns  permit.  For 
the  most  part  in  the  keeping  of  records  by  a  card-filing 
system,  it  is  altogether  one's  own  afl*air. 


COLLECTING  BUSINESS  FACTS  167 

(b)  The  arrangement  of  the  cards  in  any  system  can  be 
made  to  suit  any  purpose.  When  the  purpose  has  been 
clearly  defined  it  is  then  a  matter  of  no  great  difficulty  to 
make  the  filing  system  suit  this  aim.  The  system  should  be 
kept  as  simple  as  possible  and  the  analysis  should  go  into 
details  as  far  as  may  be  proved  desirable.  The  size  of  the 
cards  will  be  adjusted  to  the  amount  and  kind  of  material 
they  are  to  carry.  In  the  system  the  cards  may  be  ar- 
ranged on  any  analytical  basis  that  appears  to  be  most 
serviceable.  The  general  principle  in  the  arrangement  is 
that  when  compiled  the  material  should  be  largely  ana- 
lyzed. 

(c)  There  are  several  methods  of  filing  material  by 
cards.  The  one  to  be  used  wiU  depend  upon  the  immedi- 
ate purpose  in  view.  One  of  these  methods  is  by  letters 
of  the  alphabet.  A  second  one  is  on  a  geographical  basis. 
Sales,  for  example,  may  be  filed  on  the  basis  of  states, 
counties,  cities,  or  otherwise.  Another  method  is  on  a 
numerical  basis  where  figures  mark  off  the  various  points. 
Then,  again,  the  system  may  be  based  upon  chronology 
where  the  time  element  is  the  essential  thing.  Another 
method  of  filing  is  by  subjects.  Here,  of  course,  the  mate- 
rial is  analyzed  as  it  is  filed.  One  may  also  use  names  as 
the  basis  of  a  filing  system.  It  is  always  possible  to  com- 
bine these  methods  and  gain  the  advantages  of  more  than 
one  in  any  filing  system.  As  has  been  said,  the  purpose  in 
view  will  probably  determine  the  method  to  be  used  in  every 
case.  Experience  also  will  be  the  best  guide  in  deter- 
mining how  far  the  filing  anal3'sis  shall  go  and  what  kind 
of  cross  references  should  be  made. 

Once  the  method  of  filing  has  been  selected,  the  arrange- 
ment of  cards  may  be  either  by  color  or  by  position. 
Cards  are  usually  arranged  to  carry  the  main  topics  by 


168  COMMERCIAL  RESEARCH 

the  above  methods.  The  advantages  of  color  and  position 
will  be  fully  explained  by  those  who  have  the  system  to 
sell.  (Note:  The  following  characteristics  of  the  per- 
fect index  have  been  assembled  by  one  of  the  larger  manu- 
facturers of  filing  cases.  The  items  listed  will  be  valuable 
as  suggestions  in  organizing  a  system.) 

The  Perfect  Index. 

"  Perfect  Alphabetical  Index." 

1.  It  must  be  simple  to  operate. 

2.  It  must  not  be  complicated  by  numerical  or  other  addi- 
tional factors,  such  as  the  use  of  given  name  or  sur- 
name. 

3.  It  should  have  one  letter  only  on  each  tab  so  far  as  pos- 
sible. 

4.  It  must  be  accurate  in  filing  and  finding. 

5.  It  must  be  swift  as  well  as  accurate. 

6.  It  must  be  applicable  to  the  exact  conditions  of  any 
particular  file. 

7.  It  must  be  able  to  expand  with  the  file  as  it  grows,  or 
change  as  the  requirements  of  the  file  change. 

8.  It  must  divide  the  papers  into  evenly  proportioned 
groups  throughout  the  file. 

9.  It  must  not  have  a  single  useless  guide. 

First  Principles  of  Filing,  p.  31. 
THE  MACEY  COMPANY 

By  Mail.  A  method  that  is  very  much  used  by  business 
men  to-day  in  collecting  data  from  outside  the  business  is 
by  sending  inquiries  by  mail  to  a  selected  list  of  people 
who  have  the  experience  and  knowledge  of  facts  desired. 
This  method  of  securing  material  has  very  difficult  prob- 


COLLECTING  BUSINESS  FACTS  169 

lems  connected  with  it.  The  task  of  writing  a  good  letter 
of  inquiry  is  in  itself  a  complex  and  difficult  one.  It  is  so 
easy,  however,  to  send  off  a  letter  hoping  for  good  results, 
that  this  method  is  likely  to  be  overdone.  No  investiga- 
tion of  great  importance  can  be  carried  on  by  this  method 
alone.  There  is  every  evidence  that  business  men  are 
growing  restive  under  the  deluge  of  letters  of  inquiry 
which  they  receive  from  day  to  day.  To  these  time- 
consuming  inquiries  must  be  added  the  increased  number 
of  reports  required  by  government  authorities.  In  some 
cases  the  business  men  are  beginning  to  wonder  how  much 
time  they  will  have  left  for  their  own  affairs. 

One  cannot  blame  the  busy  manager  if,  when  he  receives 
a  letter  containing  a  number  of  questions,  he  is  likely  to 
inquire:  "What  do  I  get  out  of  it?"  As  a  matter  of 
fact,  in  most  cases  he  gets  nothing  at  all  except  possibly 
the  good  will  felt  by  those  whom  he  has  served.  Knowing 
this  full  well,  he  is  very  much  inclined  to  throw  the  letter 
and  all  its  contents  into  the  waste-paper  basket.  How- 
ever useful  this  system  may  be  in  supplementing  facts,  it  is 
becoming  more  and  more  clear  that  important  business 
investigations  must  be  carried  on  b}'  other  means.  Much 
valuable  information,  however,  is  available  through  this 
medium,  and  it  is  in  itself  sufficiently  useful  to  justify 
detailed  discussion. 

It  is  a  general  custom  to  secure  information  either  by  a 
combination  of  a  letter  and  an  inquiry  or  by  a  letter  which 
introduces  the  questions  to  be  asked.  Unless  the  inves- 
tigation is  of  a  very  simple  character,  it  is  wise  to  make 
the  questions  themselves  an  inclosure  in  the  letter.  In 
both  cases,  however,  there  is  need  of  great  skill  in  writing 
a  letter  and  in  framing  the  inquiries.  The  chief  purpose 
of  the  letter  itself  is  to  persuade  some  one  to  do  something 


170  COMMERCIAL  RESEARCH 

for  you.  The  letter  must  persuade  to  a  course  of  action 
which  is  for  your  own  personal  interest.  It  is  both  a  dif- 
ficult and  a  delicate  matter  to  achieve  success  in  a  letter  of 
this  sort.  Some  of  the  qualities  necessary  for  success  will 
be  discussed  here.  The  construction  of  the  inquiries  them- 
selves will  be  treated  separately. 

(1)  The  letter  of  inquiry  must  first  of  all  interest  the 
reader.  If  it  does  not  at  once  make  its  way  into  his  inter- 
est, then  it  is  lost  in  the  waste-paper  basket.  There  are 
countless  methods  that  may  be  used  to  secure  interest  at 
once,  but  one  out  of  these  many  may  be  suggested  in  detail. 
A  very  successful  means  of  awakening  interest  is  to  state 
the  problem  which  forms  the  basis  of  the  inquiry  in  an 
interesting  way.  It  is  not  sufi^ciently  realized  by  most 
business  men  that  their  problems  are  in  large  part  common 
to  them  all.  If  this  were  realized  and  if  the  very  begin- 
ning of  the  letter  defined  one  of  the  reader's  own  problems 
clearly,  there  would  be  an  excellent  chance  of  arousing  his 
interest  in  the  matter  under  inquiry.  This  statement  of 
the  problem  might  bring  to  him  a  new  point  of  view.  It 
might  present  the  case  more  strongly  than  he  had  heard  it 
presented  before.  It  might  phrase  for  him  what  had  been 
heretofore  in  his  mind  a  vague  idea.  If  he  can  see  how 
this  problem  arises  in  his  own  business,  one  may  well  expect 
him  to  do  some  thinking  on  the  paper  which  contains  the 
inquiry.  Such  returns  from  an  investigation  will  prove 
of  great  value.  In  most  cases,  it  is  wise,  therefore,  to 
begin  such  a  letter  with  the  statement  of  the  problem  in  as 
concrete  and  vivid  a  manner  as  possible. 

(2)  A  letter  of  this  sort  must  also  be  brief,  succinct, 
and  to  the  point.  It  is  not  a  newspaper  that  is  presented 
before  the  reader,  and  there  is  no  leisure  to  scan  it  as  may 


COLLECTING  BUSINESS  FACTS  171 

be  true  of  the  morning  or  evening  news.  A  pertinent 
question  to  ask  in  regard  to  such  a  letter  is :  What  does 
the  first  glance  show?  This  is  in  reality  the  critical  mo- 
ment. In  meeting  this  question  it  is  good  advice  which 
says  to  study  yourself.  Your  are  probably,  after  all,  a 
typical  business  man.  How  do  letters  affect  you?  What 
interests  you?  What  do  you  consign  to  the  oblivion  of 
the  waste-paper  basket?  In  the  writing  of  letters,  as  in 
all  other  matters  of  conduct,  to  your  own  self  be  true. 

(3)  Much  has  been  written  in  recent  times  about  busi- 
ness letters  filled  with  what  is  called  in  business  parlance, 
"  punch."  There  is  no  doubt,  however,  but  that  this 
quality  may  be  overdone.  Courtesy,  even  in  business  re- 
lations, is  not  a  lost  art.  There  can  be  no  question  but 
that  a  letter  gathers  force  as  it  becomes  more  simple  and 
more  direct.  It  must  be  remembered,  however,  that  a 
good  letter  is  characterized  by  natural  simplicity  and  not 
by  artificialit}',  by  directness  and  not  by  smartness.  It  is 
so  easy  for  the  so-called  punch  in  business  letters  to  de- 
generate into  mere  smartness  and  even  impudence. 

(4)  No  better  advice  in  writing  a  letter  of  inquiry  can 
be  given  than  to  try  to  visualize  the  reader.  One  should 
attempt  to  imagine  the  receipt  of  his  letter  by  some  one 
sitting  at  a  desk  who  opens  that  letter  and  receives  his 
most  vivid  impression  by  his  first  glance.  This  is  the 
impression  that  really  counts.  The  most  important  thing 
to  keep  in  mind  in  writing  a  letter  of  this  kind  is  that  the 
real  point  is  not  what  the  writer  says,  but  what  the  reader 
gets.  Successful  commercial  writing  is  that  which  has  the 
greatest  power  of  impression  and  not  that  which  has  the 
greatest  facility  of  expression.  This  letter  has  made  its 
way  past  all  the  guards  into  the  office  of  the  business 


172  COMMERCIAL  RESEARCH 

man.  It  is  often  the  case  that  a  letter  can  go  in  where 
visitors  cannot.  But  the  writer  should  be  careful  not  to 
abuse  this  privilege. 

(5)  It  is  also  of  prime  necessity  that  the  writer  of  a 
letter  of  inquiry  should  have  himself  a  clear  understand- 
ing of  the  business  problem.  The  most  effective  letter 
springs  directly  out  of  a  given  situation.  It  must  meet 
all  the  conditions  of  that  situation.  It  is  the  representa- 
tive of  the  sender,  and  it  should  carry  with  it  the  person- 
ality and  skill  and  judgment  of  the  writer.  This  can  be 
true  only  when  the  writer  has  thoroughly  mastered  the 
subject  upon  which  he  writes. 

(6)  Another  quality  of  the  letter  of  inquiry  is  that  of 
sincerity.  Every  letter  should  have  this  characteristic. 
But  it  is  especially  true  of  the  letter  which  asks  another  to 
do  a  favor  that  it  should  be  obviously  and  absolutely  sin- 
cere. Any  pretense  is  dangerous.  Sham  and  cant  are 
very  likely  to  be  discovered.  If  they  are,  their  effects  will 
be  unfortunate. 

(7)  The  letter  of  inquiry  must  also  explain  the  point 
at  issue  and  give  directions  clearly  and  exactly  as  to  what 
is  to  be  done.  The  writer  should  remember  that  the  pri- 
mary aim  is  to  get  action.  This  is  to  be  prompt,  imme- 
diate, but  careful  action.  The  point,  therefore,  which  the 
letter  carries  must  always  be  explicit.  When  this  is  made 
clear  and  interesting  it  then  remains  to  show  what  is  to  be 
done  by  the  reader.  The  story  is  told  to  illustrate  the 
different  effects  produced  by  famous  speakers,  that  those 
who  went  to  hear  the  great  Greek  orator,  Demosthenes, 
came  away  saying  to  one  another :  "  Let  us  go  and  fight 
the  enemy.  King  Philip,"  while  those  who  went  to  hear  the 
great  Roman  orator,  Cicero,  urge  similar  action  against 


COLLECTING  BUSINESS  FACTS  173 

Catiline,  came  away  saying  to  one  another :  "  What  a 
great  orator  he  is."  This  illustrates  the  difference  be- 
tween a  letter  which  calls  attention  to  itself  but  leads  to 
no  action  and  the  letter  which  secures  the  action  desired. 
It  is,  of  course,  necessary  that  the  action  shall  be  as  little 
burdensome  as  possible. 

(8)  Careful  attention  should  also  be  given  to  the  gen- 
eral form  of  the  letter.  There  is  a  question  of  the  kind  of 
stationery  to  be  used.  To-day  most  large  firms  are  giving 
considerable  time  to  the  study  of  the  business  letter  from 
this  point  of  view.  When  it  is  remembered  that  these 
outward  characteristics  are  a  part  of  the  first  impression, 
their  importance  is  clear.  Not  only  should  there  be  good 
judgment  in  the  wording  of  the  letter  itself,  but  there 
should  also  be  good  taste  in  the  form  of  the  letter. 
"  Business  correspondence  has  become  an  art." 

(9)  The  writer  of  a  business  letter  should  always  have 
some  method  of  testing  its  excellence.  There  is  one  test 
always  at  hand ;  that  is  the  results  which  are  produced. 
"  The  real  test,  and  the  only  test  of  a  business  letter,  is 
this :  Does  it  make  your  correspondent  do  what  you  want 
him  to  do?  Does  he  respond?"  (Gardner,  "Efficient 
Business  Letters,"  p.  232.)  In  one  respect,  at  least,  a 
letter  of  inquiry  is  like  a  machine.  If  it  does  not  do  its 
work,  the  machine  goes  to  the  junk  heap.  If  the  letter 
does  not  arouse  interest  and  secure  attention,  it  goes  to 
the  waste-paper  basket.  The  real  test,  therefore,  is  what 
is  the  impression  which  the  letter  makes  upon  the  reader? 

(10)  Another  phase  which  needs  consideration  is  what 
may  be  called  the  mechanics  of  the  letter.  This  term  in- 
cludes the  heading  of  the  letter,  the  superscription,  and 
the  ending.     It  is  rare  that  a  letter  of  inquiry  should  cover 


174  COMMERCIAL  RESEARCH 

more  than  a  single  page.  More  than  this  seems  too  for- 
midable for  the  busy  man  to  read.  No  further  advice 
than  that  good  taste  should  be  used  in  the  selection  of 
letter  headings  needs  to  be  given.  Many  of  the  paper 
companies  have  published  very  suggestive  pamphlets  illus- 
trating many  kinds  of  headings  which  may  be  used.  The 
real  test  of  the  mechanics  of  a  letter  is  that  the  attention 
should  be  centered  upon  the  real  point  of  inquiry  which  the 
letter  contains  and  at  the  same  time  gives  all  the  necessary 
information  as  to  whence  the  letter  has  come  and  where  the 
answer  is  to  be  sent.  Sometimes  letters  of  inquiry  of  this 
character  are  sent  out  under  an  assumed  name  by  adver- 
tising agencies  and  business-investigation  companies.  On 
the  whole,  this  is  not  a  wise  policy.  There  is  in  it  a  lack 
of  frankness  and  sincerity  which  will  almost  inevitably  de- 
crease the  effectiveness  of  the  letter. 

An  example  of  the  letter  of  inquiry  which  contains  many 
excellent  points  is  given  below.  It  will  be  seen  that  this 
letter  attempts  to  meet  most  of  the  requirements  which 
have  been  discussed.  It  is  not  in  every  respect  a  model, 
but  will  readily  serve  to  illustrate  the  character  of  this 
kind  of  a  business  letter. 

Dear  Mr.  ; 


The  query  in  my  mind  is  —  does  Mrs.  Average  Woman  have 
more  confidence  in  articles  recommended  by  her  dealer  or  in 
articles  which  she  sees  advertised  ? 

This  is  no  doubt  a  question  to  which  you  have  given  much 
thought.  Your  judgment  and  experience  would  be  of  great 
value  in  helping  to  answer  it. 

Take  woman's  dress  goods,  dress  silks,  and  wash  fabrics, 
for  examples.  Has  the  dealer's  influence  in  the  sale  been 
reduced  by  the  national  advertising  of  brand  names  on  these 
goods .'' 


COLLECTING  BUSINESS  FACTS  175 

A  simple  check  in  the  squares  on  the  inclosed  card  will  carry 
to  me  your  matured  judgment.  You  may  be  sure  that  I  shall 
appreciate  it  very  much. 

Very  sincerely  yours, 

P.  S. —  Any  comments  or  observations  which  you  may  feel 
inspired  to  give  would  be  welcomed. 

The  Questionnaire.  The  most  important  and  the  most 
difficult  medium  for  collecting  business  facts  is  the  ques- 
tionnaire. There  are  many  problems  connected  with  the 
construction  of  a  questionnaire  which  need  careful  atten- 
tion. The  purpose  in  this  discussion  is  to  call  these  points 
into  review  and  make  a  general  survey  of  the  subject.  An 
attempt  will  be  made  to  be  suggestive  of  principles  for 
guidance  in  the  framing  of  questions  whose  purpose  is  to 
secure  reliable  business  data.  The  success  of  an  investi- 
gation depends  very  largely  upon  the  success  in  making  a 
usable  questionnaire. 

The  problem  of  framing  a  questionnaire  has  three  main 
aspects.  Each  of  these  is  very  important  in  itself  and 
can  be  settled  finally  only  in  its  relation  to  the  other  two. 
The  first  point  of  view  is  that  of  the  person  who  is  to 
answer  the  questions.  This  is  the  beginning  of  the  analy- 
sis for  the  construction  of  the  series  of  questions.  An- 
other aspect  is  that  of  the  one  who  is  to  collect  the  data. 
This  point  becomes  of  particular  importance  when  the 
investigation  is  to  be  carried  on  by  a  personal  visit. 
Where  the  questionnaire  is  a  mere  inclosure  in  a  letter  of 
inquiry,  there  is  no  special  point  in  thinking  of  the  col- 
lector, because  the  writer  and  the  collector  are  one  and 
the  same  person.  The  third  aspect  is  that  of  the  ques- 
tionnaire itself.     It  should  be  considered  as  a  document 


176  COMMERCIAL  RESEARCH 

even  apart  from  the  person  who  is  to  be  questioned  and 
from  the  collector.  Each  of  these  phases  will  be  discussed 
somewhat  in  detail. 

1.  The  Person  to  Be  Questioned.  One  of  the  first  con- 
siderations in  thinking  of  the  person  to  be  questioned  is 
this :  Can  he  answer  these  queries  ?  It  is  obvious  that 
time  will  be  wasted  in  useless  endeavor  if  inquiries  are  of 
such  a  character  that  the  person  questioned  cannot  give 
an  intelligent  answer.  It  is  assumed  in  making  an  investi- 
gation that  the  person  of  whom  the  inquiry  is  made  has 
some  special  and  important  information  to  give.  Unless 
this  is  the  case,  there  can  be  no  good  reason  for  making 
the  investigation.  The  analysis  of  this  point  should, 
however,  go  further  than  the  mere  determination  of  wliether 
the  person  questioned  has  any  knowledge  which  lies  within 
the  field  of  inquiry.  Many  businesses  have  technical 
phases  that  require  highly  specialized  knowledge.  It  is 
not  every  one  in  the  business  organization  who  has  this 
technical  knowledge.  The  man  in  the  office  may  be  quite 
ignorant  of  the  technical  matters  in  the  shop.  The  gen- 
eral manager  may  not  know  the  details  of  accounting. 
The  sales  manager  may  not  be  an  authority  on  the  subject 
of  buying.  It  is,  of  course,  the  beginning  of  wisdom  to 
ask  a  question  which  lies  within  the  special  duties  of  the 
one  who  is  to  answer. 

The  second  test  of  the  questionnaire  from  this  point  of 
view  is :  Will  the  person  questioned  understand  the  ques- 
tions asked.''  This  means  that  the  framing  of  the  par- 
ticular questions  must  be  such  that  the  one  who  is  to  an- 
swer will  quickly  and  readily  grasp  their  exact  significance. 
It  is  not  every  one  who  can  ask  an  intelligent  question. 
Sometimes  a  question  will  reveal  an  embarrassing  amount 
of  ignorance  on  the  part  of  the  questioner.     No  one  is 


COLLECTING  BUSINESS  FACTS  177 

equipped  to  frame  a  series  of  questions  for  the  purpose  of 
business  investigation  who  does  not  understand  the  par- 
ticular terminology  of  the  business  into  which  he  is  inquir- 
ing and  who  cannot  ask  questions  that  are  intelligible  to 
any  one  familiar  with  that  business.  Much  writing  in 
philosophy  is  unintelligent  to  the  ordinary  reader  because 
the  language  in  which  it  is  clothed  is  not  the  language 
which  he  uses.  An  inquiry  into  any  business  that  is 
couched  in  academic  terms  of  political  economy  may  not 
convey  to  the  business  man  any  definite  idea.  It  is  obvi- 
ous that  the  best  returns  will  be  secured  from  the  most 
intelligent  questions. 

A  further  consideration  of  the  questionnaire  from  this 
point  of  view  is  —  will  the  person  questioned  be  willing  to 
answer?  It  is  a  waste  of  time,  of  course,  to  ask  questions 
of  such  character  as  to  antagonize  the  one  who  is  ques- 
tioned. It  is  equally  useless  to  frame  inquiries  to  which 
the  business  man  will  not  be  willing  to  make  reply.  His 
unwillingness  to  answer  may  be  due  either  to  the  way  in 
which  the  question  is  framed,  or  to  the  nature  of  the  ques- 
tion itself.  It  is  nearly  always  possible  to  secure  informa- 
tion indirectly  w;here  the  direct  method  has  proved  to  be  a 
failure.  That  was  shrewd  advice  which  urged  upon  the 
inquirer  in  personal  affairs  "  by  indirection  to  find  direc- 
tion out."  This  does  not  mean  that  any  unfair  or  under- 
handed methods  should  be  used.  The  point  is  that  great 
skill  and  tact  are  needed  to  frame  the  questions  in  such  a 
way  as  to  secure  the  greatest  amount  of  information  with 
least  friction.  The  business  man  has  not  much  leisure, 
generally,  and  desires  that  the  questions  asked  him  be 
brief  and  to  the  point  but  at  the  same  time  he  appreciates 
courtesy  and  tact. 

There  is  a  further  consideration  of  the  questionnaire 


178  COMMERCIAL  RESEARCH 

from  the  point  of  view  of  the  person  questioned.  This  has 
to  do  with  the  character  of  the  questions.  The  general 
rule  is  that  the  questions  should  be  of  such  a  character  as 
to  elicit  simple  and  definite  answers.  Generally  the  replies 
which  are  secured  from  the  questionnaires  have  to  be  pre- 
sented in  some  intelligent  order.  These  replies  must  be  of 
such  a  kind  that  they  can  be  readily  classified.  If,  for 
example,  it  is  desired  to  tabulate  the  answers  that  have 
been  received,  they  must  be  of  a  tabulatable  character; 
that  is,  the  replies  should  be  either  "  Yes  "  or  "  No  "  or 
in  figures.  When  they  are  merely  descriptive  and  vague 
they  are  not  of  such  character  as  to  be  tabulatable.  This 
means,  in  other  words,  that  such  replies  do  not  furnish  a 
basis  for  generalization.  For  example,  the  following 
question  was  included  in  a  long  and  complicated  question- 
naire, the  reply  to  which  is  also  given :  "13.  What  is 
your  plan  for  finding  out  where  to  buy  goods  to  the  best 
advantage?  Answer.  Sugar  and  butter  are  advertised  as 
three  cents  cheaper  and  when  you  get  it  the  quality  is 
bad." 

Such  a  question  and  such  an  answer  will  not  give  a 
fair  basis  for  any  judgment  of  policy  or  practice.  The 
vagueness  of  the  question  and  the  vagueness  of  the  an- 
swer make  the  whole  investigation  on  this  point  useless. 

Another  point  to  be  considered  is  the  case  of  entering 
the  reply  on  the  questionnaire.  This  is  of  particular  im- 
portance when  the  questionnaire  is  sent  by  mail.  There  is 
no  chance  to  secure  a  large  number  of  replies  when  the 
questions  require  considerable  time  or  effort  to  answer. 
The  best  method,  whether  the  questionnaire  is  sent  by 
mail  or  is  carried  by  a  personal  investigator,  is  to  have  the 
questions  framed  in  such  a  way  as  to  enable  the  answer  to 
be  made  by  a  single  word,  "  Yes  "  or  "  No,"  or  by  a  check. 


COLLECTING  BUSINESS  FACTS  179 

It  is  not  always  possible,  however,  to  frame  questions  in 
this  way.  When  the  questionnaires  are  carried  by  per- 
sonal investigators,  it  is  wise  to  frame  them  in  such  a 
way  that  the  investigator  may  quickly  enter  whatever 
replies  he  may  receive.  Much  valuable  information  may 
be  secured  as  a  by-product  of  the  questionnaire  if  some 
room  is  left  for  additional  remarks.  If,  by  chance,  the 
person  questioned  has  a  real,  live  interest  in  the  inquiry, 
he  may  be  willing  to  add  some  comments  not  directly 
called  for  by  the  questions.  These  additional  comments 
often  contain  very  illuminating  sidelights. 

2.  Collector  of  Data.  The  collector  of  business  facts 
both  by  mail  and  by  personal  interview  must  be  qualified 
for  his  task.  The  characteristics  of  the  letter  of  inquiry 
have  already  been  discussed.  It  now  remains  to  be  pointed 
out  that  no  successful  investigation  is  likely  to  be  made 
unless  the  investigator  is  fully  equipped  for  this  duty. 
One  of  the  obvious  requirements  is  that  he  shall  have  a 
suflBcient  background  of  knowledge  in  the  particular  field 
where  his  inquiry  lies.  Experience  also  is  a  great  asset 
in  carrying  on  investigation.  One  learns  by  experience 
how  to  approach  business  men,  how  to  ask  questions  so 
as  to  secure  the  best  information.  In  this  kind  of  work 
there  is  need,  of  course,  of  a  high  degree  of  tact.  The 
task  is  a  difficult  and  delicate  one.  Blunders  are  very 
costly.  They  may  mean  failure  in  this  case,  and  an 
antagonistic  attitude  for  the  future.  Some  men  have  nat- 
ural qualifications  for  making  business  inquiries ;  others 
require  much  training  before  they  can  be  successful. 

From  the  point  of  view  of  the  collector,  the  question- 
naire should  be  examined  to  see  if  the  form  and  organiza- 
tion of  the  queries  are  the  best  possible  with  reference  to 
tlie  ease  of  asking  questions.     This  means  that  considera- 


180  COMMERCIAL  RESEARCH 

tion  should  be  given  to  the  order  in  which  the  questions 
appear.  Clearly,  the  first  question  should  furnish  a  nat- 
ural and  graceful  method  of  approach  or  of  introduction. 
The  most  general  and  the  questions  most  readily  answered 
are  those  which  would  naturally  come  first.  There  are 
always  in  the  questionnaire  some  "  ticklish "  questions. 
It  is  useless  to  ask  these  until  the  way  has  been  opened 
for  them.     If  possible,  these  should  come  last  in  the  series. 

Another  test  of  the  questionnaire  from  the  point  of 
view  of  the  collector  is  whether  the  questions  are  of  sucli 
character  as  to  make  possible  a  rapid  and  accurate  re- 
cording of  the  answers.  It  is  almost  always  unwise  for 
queries  to  be  framed  in  such  fashion  as  to  require  long 
answers  to  be  written  in.  Even  where  the  investigation  is 
carried  on  by  personal  interviews,  it  is  much  safer  to  have 
the  questionnaire  so  constructed  that  the  interviewer  can 
use  checks  or  single  brief  words  to  indicate  the  replies. 
The  business  man,  in  general,  immediately  becomes  nervous 
when  he  sees  his  words  being  written  down  on  paper.  His 
instant  reaction  is  that  he  is  committing  himself.  Many 
times  he  will  be  self-conscious  and  afraid  he  has  said  too 
much.  The  business  man  is  generally  timid  in  the  matter 
of  being  questioned.  This  is  due  to  the  fact  that  he  has 
the  good  will  of  his  customers  and  of  others  who  deal  with 
him  to  maintain.  However  radical  his  private  opinions 
may  be,  he  feels  that  he  must  suppress  them  for  "  the  good 
of  the  system."  It  is,  of  course,  not  wise  for  the  investi- 
gator to  arouse  such  fears  as  these. 

No  investigator  is  ready  to  do  his  best  work  unless  he 
is  so  familiar  with  the  questions  to  be  asked  that  he  does 
not  need  to  rel}^  upon  the  questionnaire  itself.  This  docu- 
ment, however,  offers  the  best  method  of  training  the  inves- 
tigator in  the  proper  means  of  approach  and  in  enabling 


COLLECTING  BUSINESS  FACTS  181 

him  to  direct  the  conversation  with  the  business  man  into 
the  proper  channels.  There  is,  to  be  sure,  the  further 
need  for  a  careful  record  of  the  facts  secured  before  they 
have  grown  dim  in  the  memory.  In  practically  every  in- 
stance, it  will  be  found  that  a  little  experience  with  the 
given  questionnaire  will  reveal  the  essential  and  the  minor 
questions  that  appear  there.  While  it  may  be  too  late 
to  change  the  entire  document,  it  will  not  be  too  late  to 
emphasize  the  essential  questions.  In  this  case,  as  in  all 
others,  an  alert  judgment  is  necessary  for  best  results. 
If  the  questionnaire  is  not  actually  used  in  interview,  the 
investigator  should  not  delay  for  long  after  the  close  of 
the  interview  before  he  notes  down  the  answers  to  the 
queries.     The  human  memory  is  an  unreliable  thing. 

In  every  interview  there  is  much  more  than  actually 
appears  on  the  surface.  He  is  not  an  investigator  of  the 
first  grade  who  does  not  carry  away  from  every  conversa- 
tion far  more  than  the  words  themselves  express.  There 
is  around  this  conversation  an  aura  of  observation  and 
interpretation  which  may  be  of  great  importance  in  the 
final  results.  The  best  investigator  is  the  keen  observer 
who  is  quick  to  see  and  interpret  every  detail.  It  Is  prob- 
ably wise,  therefore,  for  the  questionnaire  to  have  a  space 
left  for  comments  or  remarks  to  carry  these  extra  facts. 

3.  The  Document  Itself.  Apart  from  the  person  to  be 
questioned  and  from  the  interviewer,  the  questionnaire  may 
be  considered  as  a  document  in  and  of  itself.  Certain 
questions  should  be  asked  which  will  test  the  efficiency  of 
this  document.  One  of  these  questions  is:  Is  there  a 
logical  grouping  of  the  queries  in  the  questionnaire.'*  It 
may  be  that  there  is  a  repetition  of  questions.  It  often 
happens  that  one  query  will  bring  the  answer  to  one  or 
more  others.     Where  this  is  true,  it  is  a  waste  of  time  to 


182  COMMERCIAL  RESEARCH 

include  them  all.  There  is  also  the  question  of  unity  in 
the  questionnaire.  Do  all  the  queries  bear  upon  the  essen- 
tial points  of  the  investigation?  Sometimes  question- 
naires carry  inquiries  that  have  only  an  indirect  bearing 
upon  the  issues  of  the  case.  In  general,  it  would  be  wise 
to  eliminate  such  questions  as  these.  There  is  also  the 
question  of  compactness  of  the  questionnaire.  It  should 
be  framed  with  a  view  to  the  greatest  economy  of  space. 
By  careful  analysis  it  is  possible  to  crowd  into  a  very 
brief  space  a  great  deal  of  information.  By  classifying 
and  subordinating  topics  such  results  are  obtained.  It  is 
also  necessary  to  examine  the  document  to  see  that  the 
questions  are  so  arranged  as  to  enable  the  collector  to  jot 
down  the  facts  required  whether  the  actual  questions  asked 
are  on  the  questionnaire  or  not.  The  importance  of  this 
will  be  readily  justified  by  experience.  It  is  frequently 
true  that  a  question  concerning  the  prosperity  of  a  busi- 
ness may  furnish  the  data  for  volume  as  well  as  net  re- 
turns. There  should  be  on  the  questionnaire  a  place  for 
tabulating  all  of  these  facts  desired. 

4.  Suggestions  for  Using  the  Questionnaire.  It  may  be 
necessary  to  repeat  that  much  tact  and  skill  is  required 
for  the  best  results  from  investigations.  Every  man  must 
here  be  largely  his  own  guide  and  must  have  the  power  to 
adapt  himself  to  all  the  circumstances  of  the  case.  A  few 
general  rules,  however,  may  prove  of  value.  It  is  not  wise 
for  an  investigator  to  write  down  much  in  the  presence  of 
the  one  interviewed.  Attention  has  already  been  called  to 
the  fact  that  business  men  quickly  grow  self-conscious  in 
a  situation  of  this  kind.  There  is  also  need  of  great  care 
in  opening  up  the  subject.  It  may  not  be  possible  at  once 
to  plunge  into  the  midst  of  the  questions.  Some  business 
men  like  brevity  and  quickness  of  action.     Others  are  at 


COLLECTING  BUSINESS  FACTS  183 

first  timid  and  cautious  and  are  awkward  in  expression 
until  they  feel  full  confidence  in  the  investigator.  In  almost 
all  cases  frankness  and  directness  are  the  best  means  of 
approach.  Some  people  have  a  natural  ability  in  guiding 
conversation.  Others  must  acquire  this  capacity.  It  is 
an  interesting  game,  but  also  a  difficult  one,  to  direct  a 
conversation  into  the  proper  channels  to  secure  the  desired 
information.  Skill  in  putting  questions  is  likewise  a  great 
asset  for  the  investigator. 

There  is  probably  no  better  statement  of  the  whole  sub- 
ject of  framing  a  successful  questionnaire  than  that 
written  by  an  English  statistician.  The  passage  is  fre- 
quently quoted  and  should  be  familiar  in  every  detail  to 
any  one  interested  in  using  this  method  of  collecting  data. 
Great  depth  of  wisdom  is  contained  in  it.  The  passage 
reads  as  follows : 

"  The  questions  must  be  so  clear  that  a  misunderstanding  is 
impossible,  and  so  framed  that  the  answers  will  be  perfectly 
definite,  a  simple  number,  or  '  yes  '  or  '  no.'  They  must  be 
such  as  cannot  give  offense,  or  appear  inquisitorial,  or  lead  to 
partisan  answers,  or  suppressions  of  part  of  the  facts.  The 
mean  must  be  found  between  asking  more  than  will  be  readily 
answered  and  less  than  is  wanted  for  the  purpose  in  hand. 
The  form  must  contain  necessary  instructions,  making  mistakes 
difficult,  but  must  not  be  too  complex.  The  exact  degree  of  ac- 
curacy required,  whether  the  answers  are  to  be  correct  to  shil- 
lings or  pence,  to  months  or  days,  must  be  decided.  Every 
word,  every  square  inch  of  space  must  be  keenly  criticized.  A 
little  trouble  spent  upon  the  form  will  save  much  inconveni- 
ence afterward." 

Investigating  on  Basis  of  Functions.  The  great  ma- 
jority of  business  investigations  are  aimed  at  a  specific 
problem.  The  data  are  collected  for  a  very  definite  pur- 
pose.    The  result  is  that  most  questionnaires  are  built  up 


184  COMMERCIAL  RESEARCH 

for  a  particular  occasion  and  from  a  narrow  point  of 
view.  It  may  be  possible  to  establish  some  general  prin- 
ciples in  the  making  of  questionnaires  which  may  be 
adapted  to  any  kind  of  study.  One  writer  has  said  in 
regard  to  this  phase  of  the  subject: 

"  It  may  be  mentioned  that  one  other  feature  of  this  classifi- 
cation of  marketing  functions  is  its  value  to  the  scientific 
student  of  marketing  subjects  in  performing  his  research  work 
or  trade  investigations.  With  these  functions  in  mind,  he  can 
approach  practically  any  kind  of  dealer  or  trader  and  ask  a 
fairly  intelligent  and  comprehensive  set  of  questions  without 
knowing  much  of  anything  about  the  trade.  For  example,  sup- 
pose one  wishes  to  study  flour  brokers.  Begin  with  the  assem- 
bling function,  and  ask:  For  what  class  of  mills  do  you  sell 
flour.''  Where  are  they  located?  For  how  many  mills  do  you 
sell?  Under  what  arrangement  do  you  handle  flour  for  your 
principals?  etc.  Then  take  up  the  storage  function,  and  ask: 
Do  you  keep  flour  on  hand  for  your  principals?  If  so,  is 
it  kept  in  a  public  warehouse?  Who  pays  storage  fees? 
Why  and  how  long  is  it  kept  on  hand?  etc.  By  going  through 
the  list  in  this  way,  and  by  having  a  certain  amount  of  mar- 
chandising  knowledge  which  makes  one  answer  suggest  another 
question,  an  investigator  can  find  out  practically  everything 
he  needs  to  know  of  the  functions  of  any  class  of  traders." 
(American  Economic  Rev.,  June,  1017,  page  318.) 

If  the  suggestion  made  here  of  isolating  the  various 
functions  connected  with  marketing  products  is  followed, 
it  may  prove  to  be  possible  to  frame  a  general  question- 
naire which  is  readily  adaptable  to  any  kind  of  commer- 
cial research.  As  an  example  of  an  attempt  to  carry  out 
this  suggestion,  the  following  questionnaire  is  given : 

BROKERS 

1.  Name.  Location. 

2.  Commodities  handled. 


COLLECTING  BUSINESS  FACTS  185 

3.  Whom   do   you   represent?    (manufacturers^   importers, 

etc.) 

4.  Where  are  they  located? 

5.  How  many  concerns  do  you  sell  for  ? 

6.  Why  is  it  cheaper  for  them  to  employ  you,  rather  than 

send  you  their  own  salesmen? 

7.  Do  your  principals  keep  stocks  of  goods  on  hand  in 

Chicago  ? 

8.  In  public  warehouses  ? 

9.  Do  you  have  to  get  prices  confirmed? 

10.  Do  you  advance  money  to  principals? 

11.  Does  your  principal  bill  direct  to  purchasers? 

12.  Do  you  have  exclusive  sale  of  your  principal's  products 

in  this  territory? 

13.  Just  what  is  your  territory? 

14.  What  is  the  usual  brokerage  fee? 

15.  Any  smaller  fee  for  large  sales  or  contracts? 

16.  Do  you  buy  goods  on  your  own  account? 

17.  If  so,  do  you  buy  to  speculate,  or  merely  to  have  stock 

on  hand  for  your  customers  ? 

18.  Is  there  a  tendency  for  manufacturers  or  importers  to 

employ  their  own  paid  representatives  instead  of  sell- 
ing through  brokers? 

19.  To  what  class  of  dealers  do  you  sell? 

20.  Do  your  customers  try  to  buy  direct,  rather  than  through 

brokers  ? 

A  questionnaire  may  be  brief  in  form  yet  comprehensive 
in  character.  In  this  case  it  is  desired  to  obtain  the 
greatest  possible  information  with  least  effort.  The  re- 
sults of  such  an  inquiry  are  likely  to  be  less  reliable  than 
when  it  is  more  detailed.  It  is,  of  course,  clear  that  such 
a  questionnaire  must  be  used  by  an  investigator  and  will 
not  serve  as  a  means  of  collecting  by  mail.  In  such  in- 
stances there  is  much  that  is  left  to  the  investigator.  The 
example  below  will  illustrate  the  point  discussed  here. 


186  COMMERCIAL  RESEARCH 

DEPARTMENT  STORES 

1.  Are  women's  dress  goods  sold  by  brand? 

2.  If  so,  does  customer  demand  a  certain  brand,  or  is  the 

brand  sold? 

3.  Is  stock  selected  on  the  basis  of  brands?     Yes.     No. 

If  otherwise,  on  what  principle? 

4.  Is  the  stock  plan  modified  by  requests   of  customers? 

5.  Is  the  purchaser  insistent  on  getting  the  brand  asked 

for? 

6.  Is  there  anything  in  the  character  of  the  goods  that  will 

explain  the  condition? 

7.  Is  the  condition  the  same  for  the  following  articles? 

a.  Women's  ready-to-wear  garments? 
h.  Silk  goods  ? 
c.  Hosiery? 
If  there  is  a  difference,  how  can  it  be  explained  ? 

8.  What   are   the   most  popular   brands   of   these   goods? 

Why? 

9.  Would  you  say  the  following  brands  are  sold  to  customer 

by  sales  person  or  are  asked  for  by  customer  ?      Why  ? 
a.  Betty  Wales  Dresses. 
h.  Burson  Hosiery. 

c.  Printzess  Dresses. 

d.  Mallinson's  Silks. 

10.  Which  do  you  find  to  be  the  stronger  selling  point: 
a.  Goodwill  attached  to  the  name? 
h.  Price? 

The  survey  may  be  far  more  elaborate  than  has  yet  been 
illustrated.  Some  questionnaires  cover  many  pages  and 
require  a  long  time  to  fill  out.  Many  of  the  government 
inquiries  are  of  this  character.  These,  of  course,  carry 
the  authority  of  the  government  with  them,  and  therefore 
make  it  less  necessary  to  consider  the  convenience  of  the 
person  to  be  interviewed.  An  example  of  a  more  extended 
questionnaire  is  given  below. 


COLLECTING  BUSINESS  FACTS  187 

SHIPYARDS  QUESTIONNAIRE 

(Great  Lakes  District) 

I.   Name  of  plant. 
II.    Location  of  plant. 

III.  Number  of  laborers  in  plant: 

1.  Number  of  laborers  (foreign  born):     Percentage 

2.  Number  of  laborers  (experienced  hands)  :     Percent- 

age. 

IV.  Data  on  riveters: 

1.  Number  of  riveters:     Experienced:     Inexperienced: 

2.  Number  of  hours  worked  per  month  by  riveters. 

3.  Number  of  rivets  driven  per  month. 

4.  Average  dailj*  number  of  rivets  driven. 

5.  Standard    daily    riveting    output    for    experienced 

workers. 

6.  What  is  responsible  for  difference  ? 

V.    Methods  of  payment:     Time?     Piece  work.''     Bonus? 
Any  further  comment? 
VI.    Amount  of  pay  (actual  earnings)  by  classes  —  yearly 
basis : 
Blacksmiths  —  Amount    Rate      Machinists  —  Amount     Rate 
Boilermakers  "  "         Molders  (iron)         " 

Iron  Calkers  "  "         Painters  " 

Wood       "  "  "         Pattern  makers        " 

Carpenters  "  "         Riggers  " 

Drillers  "  "         Riveters 

Fitters  "  "         Sawyers,  circular    " 

Joiners  *'  "  S.par  makers  " 

Laborers  "  " 

VII.    Regularity  of  attendance: 
Is  work  intermittent? 
Generally  ? 
For  classes? 
Account  for  conditions. 
VIII.    Character  of  foremanship: 

1.  Selection  and  training  for  foremen. 

2.  Experience  of  foremen. 

3.  Methods  of  discipline. 


188  COMMERCIAL  RESEARCH 

IX.    Housing  conditions: 
Adequacy. 
Needs. 

Account  for  conditions. 
X.    Transportation  service: 
Adequacy. 
Needs. 

Account  for  conditions. 
XI.    Unionization  of  plant: 

Wliat  is  degree  of  unionization.^ 
On  class  basis  .^ 
Effects.? 
XII.    Strike  record: 

Number  of  strikes. 
Date  of  strikes. 
Number  of  men  out. 
Length  of  time  out. 
Causes  of  strikes. 
Results  of  strikes. 
XIII.    Instruction  given  new  workers: 
Kind. 
Amount. 
How  organized. 
REMARKS. 

Date, . 

Signed,     . 

Investigator. 


CHAPTER  VII 

THE    ANALYSIS    OF    BUSINESS    FACTS 

Business  statistics  —  Steps  in  statistical  analysis  —  Determining  the 
unit  —  Elements  of  error  —  Eliminating  errors  —  Statistical  averages 
—  Arithmetic  mean  —  The  weighted  average  —  Index  numbers  —  The 
median  —  The  Sampling  method  —  Conclusion. 

The  most  difficult  as  well  as  the  most  important  problem 
that  faces  one  engaged  in  commercial  research  is  the  task 
of  analyzing  business  facts.  The  material  has  been  col- 
lected from  many  different  sources  and  has  been  influenced 
by  many  different  forces  and  contains  inaccuracies  that 
may  make  any  conclusions  untrustworthy  unless  all  these 
things  are  isolated,  and  their  effect  is  carefully  considered. 
This  process  of  isolation  and  the  weight  to  be  given  to 
every  influence  that  has  affected  business  facts  is  the  proc- 
ess of  analysis.  How  can  one  know  the  truth  from  a 
mass  of  inaccurate  data?  How  can  one  eliminate  the 
undefined  errors  that  find  their  way  into  material  of  this 
character.'*  What  are  the  principles  that  should  guide 
one  in  his  analysis  of  business  facts .''  These  are  the  ques- 
tions which  must  be  answered  before  progress  can  be  made 
in  reaching  sound  conclusions  from  the  data  collected. 

Business  Statistics.  It  has  been  shown  that  business 
facts  are  of  two  general  classes ;  there  are  the  precise 
facts  where  every  number  represents  a  definite  unit  and 
there  are  the  estimated  values  where  judgment  of  unknown 
facts  has  been  included.  Both  of  these  types  may  appear 
in  the  form  of  figures.     On  the  surface  they  both  appear 

189 


190  COMMERCIAL  RESEARCH 

equally  definite  and  equally  specific.  This,  of  course,  is 
not  the  real  case.  Because  there  is  this  essential  differ- 
ence between  these  two  classes  of  material  there  is  need  of  a 
different  method  of  analysis  for  each.  The  handling  of 
precise  facts  is  a  relatively  simple  matter.  Even  here, 
however,  the  interpretation  of  the  facts  may  become  very 
difficult.  It  is  in  the  realm  of  estimated  values  that  the 
greatest  problem  arises,  and  it  has  been  shown  that  esti- 
.  mated  values  make  up  a  very  large  proportion  of  the  mate- 
rial which  the  manufacturer  or  merchant  must  use.  In 
the  analysis  of  this  kind  of  material,  the  principles  and 
rules  that  have  been  developed  by  the  science  of  statistics 
will  come  into  use.  These  principles  and  rules  are,  in 
general,  simple  and  not  difficult  to  employ.  They  have 
not  yet  been  stated,  however,  in  simple  or  clear  language, 
or  explained  in  such  a  way  as  to  make  them  available  for 
the  general  business  man.  Attention  will  here  be  given  to 
the  body  of  principles  that  seem  most  readily  applicable 
to  the  business  man's  problem. 

Definition  of  Statistics.  The  science  of  statistics  has 
been  defined  as  the  method  of  judging  natural  or  social 
phenomena  from  the  results  obtained  by  the  analysis  of  an 
enumeration,  or  a  collection,  of  estimates.  (W.  I.  King, 
"Elements  of  Statistical  Method,"  p.  6.)  This  defini- 
tion may  be  interpreted  in  more  popular  ternts  by  saying 
that  statistics  is  a  method  of  estimating  values  where  all 
the  data  cannot  be  represented  unit  by  unit  with  some 
definite  figure.  There  remains  over  and  beyond  every  item 
observed  or  counted  an  unknown  or  unseen  remainder 
which  must  be  judged  by  that  portion  which  has  been 
examined.  As  one  writer  on  the  subject  of  statistics  has 
expressed  it,  "  the  proper  function  of  statistics,  indeed, 
is  to  enlarge  individual  experience."      (Bowley,  "  Statis- 


ANALYSIS  OF  BUSINESS  FACTS  191 

tics,"  p.  8-9.)  The  same  idea  has  been  expressed  in  other 
terms  and  with  the  definite  aim  of  making  these  terms 
apply  to  the  business  man's  problem.  "  Statistics  may 
be  defined  as  numerical  statements  of  facts  by  means  of 
wbich  large  aggregates  are  analyzed;  the  relation  of  indi- 
vidual units  to  groups  are  observed."  (Copeland,  "  Busi- 
ness Statistics,"  p.  3.) 

From  these  definitions  it  is  to  be  seen  that  the  science  of 
statistics  aims  not  at  absolute  but  at  relative  values.  It 
attempts  to  answer  the  question,  What  is  the  relation  of 
this  unit  to  the  total  number  of  units  in  the  same  class? 
It  searches,  also,  for  the  relationships  which  exist  between 
various  units.  The  whole  subject  may  be  divided  into 
two  general  groups.  One  of  these  may  be  called  "  descrip- 
tive statistics,"  which  deals  with  the  records  of  what  has 
been  done  or  with  what  is  true  to-day.  This  kind  of  sta- 
tistics is  illustrated  by  the  United  States  Census  report. 
The  general  business  attitude  toward  the  records  kept  in 
the  business  establishment  is  also  of  this  same  character. 
The  other  kind  of  statistics  may  be  called  "  applied  sta- 
tistics." Here  the  attempt  is  to  use  the  material  that 
has  been  accumulated  for  the  purpose  of  establishing  cer- 
tain principles,  by  means  of  which  one's  conduct  may  be 
guided.  In  order  to  determine  these  principles,  the  rela- 
tionship of  cause  and  effect  must  be  found.  No  manufac- 
turer or  merchant  can  meet  his  administrative  problems 
fully  without  the  use  of  applied  statistics.  As  a  matter 
of  fact  this  is  the  new  phase  of  business  which  commercial 
research  is  ambitious  to  develop.  A  far  more  intelligent 
control  of  business  may  be  had  by  a  more  thorough  grasp 
of  these  statistical  principles  which  may  be  used  for  admin- 
istrative purposes.  It  may  be  said  that  administration  is 
the  final  aim  of  all  statistical  study  and  of  commercial 


192  COMMERCIAL  RESEARCH 

research.  It  follows,  therefore,  that  this  type  of  statistics 
is  of  great  importance  to  the  business  man. 

Steps  in  Statistical  Analysis.  There  should  be  a  logi- 
cal process  in  the  analysis  of  business  facts.  As  is  true 
of  every  other  problem,  so  this  one  must  have  a  best  place 
to  begin,  a  best  method  in  order  to  obtain  the  best  results. 
It  is  probably  true  that  every  business  problem  will  appear 
so  unique  as  to  demand  special  methods  of  analysis. 
Heretofore,  it  has  seemed  to  most  business  men  that  their 
own  individual  problems  were  so  different  from  those  of 
other  business  men  that  no  general  principles  could  be 
employed.  This  belief,  however,  is  passing  away.  Many 
people  are  seeing  that  there  are  fundamental  principles  of 
business  which  are  not  confined  to  any  establishment  or  to 
any  line  of  goods  or  to  any  community.  The  same  should 
be  true  of  the  method  of  analysis. 

The  obvious  place  to  begin  with  an  analysis  of  any  kind 
is  a  defining  of  the  problem.  The  investigator  should  al- 
ways ask  himself  what  definitely  is  the  problem  which  lies 
before  him.  Unless  the  problem  is  thus  clearU'  defined, 
much  time  and  money  may  be  wasted  and  much  material 
that  is  of  no  immediate  value  may  be  collected.  This  does 
not  mean  that  an  indirect  approach  to  a  problem  may  not 
be  under  certain  circumstances  the  wisest  method  to  use. 
It  cannot  be  emphasized  too  much,  however,  that  the  real 
issues  in  the  case  must  be  clearly  in  mind  in  order  that  the 
investigation  may  be  intelligently  conducted. 

A  very  excellent  beginning  for  defining  the  problem  is 
to  attempt  to  put  it  into  words.  There  is  no  better 
method  of  clearing  up  a  hazy  idea  than  to  phrase  it  intel- 
ligently. There  was,  for  example,  a  recent  investigation 
that  had  for  its  general  aim  to  discover  the  advertising 
influences  of  the  columns  of  certain  trade  papers.     The 


ANALYSIS  OF  BUSINESS  FACTS  193 

investigators  worked  for  some  time  in  a  general  way  on 
this  question  before  they  discovered  that  the  real  issue  in 
the  case  was  whose  influence  controlled  at  the  moment  of 
sale,  the  dealer  or  the  customer.  It  was  only  at  this 
point  that  the  problem  was  phrased  with  sufficient  clear- 
ness and  definiteness  to  make  the  investigation  clear.  In 
the  selling  of  commodities  of  a  certain  type,  does  the 
dealer's  recommendation  influence  the  customer  more  than 
the  general  advertising  appeal  carried  by  popular  maga- 
zines and  newspapers?  A  determination  of  this  question 
would  likewise  solve  the  whole  general  problem  of  the 
advertising  influence  of  trade  papers.  It  could  then  be 
known  whether  the  best  appeal  was  to  the  dealers  or  to  the 
consumers.  Probably  no  better  general  rule  could  be 
laid  down  than  this ;  namely,  that  the  first  step  in  defining 
a  problem  is  to  express  that  problem  in  clear  and  definite 
language. 

The  second  step  in  the  definition  should  be  the  taking 
apart  of  the  problem  so  as  to  see  the  various  relationships 
between  these  parts.  This  process  might  well  be  called 
the  isolating  of  the  factors.  Take,  for  example,  the  prob- 
lem cited  above.  That  is,  the  determination  of  dealer  in- 
fluence in  the  selling  of  goods.  Obviously  some  parts  of 
that  general  problem  would  be:  first,  the  kind  of  goods  in 
question;  second,  the  influence  of  trade  names  or  trade 
brands;  third,  the  character  of  consumer  advertising; 
fourth,  the  influence  of  the  manufacturer  in  putting  goods 
on  the  dealer's  shelves ;  fifth,  the  position  of  the  dealer  in 
the  community  and  his  relation  to  customers.  These  and 
many  other  phases  of  the  general  subject  should  be  care- 
fully sorted  out  and  examined  individually.  Some  of 
them,  of  course,  would  be  of  far  greater  importance  than 
others,  but  a  critical  examination  will  enable  one  to  rec- 


194  COMMERCIAL  RESEARCH 

ognize  the  main  points   and   to   subordinate  the  others. 

No  general  rule  can  be  given  that  will  prove  so  helpful  as 
a  systematic  method  developed  by  the  individual  himself. 
General  rules  can  serve  very  little  purpose  except  as  guides 
in  the  process  of  analysis.  One  writer  on  the  subject  of 
analysis  has  suggested  a  method  by  which  any  business 
problem  may  be  taken  apart.  "  The  four  steps  in  the  sys- 
tematic approach  to  business  problems  :  first,  elimination  — 
or  at  least  recognition  —  of  the  personal  factor;  second, 
separation  of  the  problem  into  its  constituent  problems ; 
third,  listing  the  factors ;  fourth,  taking  a  fresh  point  of 
view."  (Cf.  Shaw,  "  Approach  to  Business  Problems," 
Chapter  II,  p.  18-22.)  These  general  directions  show  the 
essential  difficulties  in  the  way  of  a  clear  and  disinterested 
analysis  of  a  business  problem.  One  is  too  likely  to  con- 
sider the  problem  in  its  direct  personal  relationship  to  get 
a  fair  point  of  view.  A  problem  to  be  attacked  in  the 
right  attitude  must  first  be  abstracted  from  direct  personal 
relationships.  If  this  can  be  done,  it  may  then  be  possible 
to  take  this  problem  apart  and  find  out  what  the  "  con- 
stituent problems "  are.  Such  suggestion  as  this  may 
help  the  business  man  to  approach  his  own  individual  prob- 
lems more  systematically. 

The  primary  purpose  of  all  business  anal3'sis,  as  is  true 
of  every  kind  of  analysis,  is  to  isolate  the  issues  in  the 
case.  These  issues  will  be  the  essential  points  of  conten- 
tion in  the  settlement  of  a  policy  or  a  course  of  action. 
In  every  business  problem  there  will  appear  three  kinds  of 
issues.  There  will  be  first  the  issue  of  fact.  This  means 
that  one  must  know  the  concrete  data  in  the  case  and  not 
depend  upon  rumor  or  hearsay.  The  business  world  is 
constantly  filled  with  unreliable  rumors  that  grow  with 
repetition  and  frequently  prove  absolutely  unfounded  in 


ANALYSIS  OF  BUSINESS  FACTS  195 

fact.  This  is  especially  true  in  times  of  emergency  or 
uncertainty  where  market  conditions  are  liable  to  sudden, 
unforeseen  changes.  No  business  investigation  can  make 
progress  safely  and  surely  without  making  first  a  careful 
survey  of  the  actual  facts.  The  question,  then,  of  what 
is  true  and  what  is  false  must  be  answered. 

But,  after  the  facts  have  been  determined,  there  still 
remains  the  issue  of  what  should  be  done  under  the  cir- 
cumstances. This  question  may  be  called  the  issue  of 
policy.  Whether  the  actual  facts  are  favorable  or  unfa- 
vorable, there  may  be  certain  conditions  that  will  modify 
the  individual  business  policy.  For  example,  there  may 
be  the  question  of  using  trading  stamps  as  a  method  of 
advertising  and  increasing  patronage.  The  facts  may 
show  clearly  that  this  method  will  increase  cash  business. 
This  result  is,  of  course,  the  one  to  be  desired  by  the  mer- 
chant. He  advertises  in  order  to  increase  his  business. 
The  facts  may  also  show  that  this  added  business  is  se- 
cured with  little  additional  cost;  in  fact,  the  costs  of  ad- 
vertising in  other  ways  may  be  cut  down  enough  to  pay 
for  the  trading-stamp  system.  And  yet  in  spite  of  all 
this,  it  may  still  remain  an  open  question  of  policy  as  to 
whether  the  merchant  should  use  this  method  or  not. 
There  has  been  much  public  antagonism  to  the  use  of 
trading  stamps ;  many  powerful  trade  associations  have 
strongly  opposed  it.  It  may  be,  indeed,  only  a  temporar- 
ily successful  method  of  increasing  business.  This  second 
issue  of  policy  must  then  come  up  for  consideration. 

There  is  also  another  issue  that  attaches  to  business 
problems  of  whatever  character.  This  may  be  called  the 
issue  of  theory.  On  broad,  general  grounds  what  are  the 
economic  principles  underlying  the  business  practice.'' 
The  theorist  is  the  man  who  considers  the  long-time,  or 


196  COMMERCIAL  RESEARCH 

social,  point  of  view.  He  considers  that  a  business  is 
founded  as  a  permanent  institution  and  not  as  a  tempo- 
rary matter.  He  says  that  there  are  not  only  local  and 
national  influences,  but  that  there  are  world-wide  forces 
bearing  upon  every  individual  business.  The  theorist  is 
the  man  who  talks  in  abstract  terms  of  supply  and  demand 
in  the  world  market,  of  world-wide  tendencies,  of  long-run 
policies  that  control  the  business  destinies  of  nations,  and 
that  bring  about  their  changes  regardless  of  any  individual 
concern.  No  manufacturer  or  merchant  can  disregard 
these  economic  theories. 

It  is  possible  to  reduce  every  kind  of  business  problem 
to  the  terms  of  these  three  issues.  This  is,  in  fact,  the 
goal  of  commercial  analysis.  "  The  important  thing  is  to 
isolate  the  issues  in  the  case.  To  this  end  an  analysis  of 
the  arguments  shows  that  they  fall  into  three  groups. 
First,  the  issues  of  fact ;  second,  the  issues  of  policy,  and 
third,  the  issues  of  theory.  The  issues  of  fact  are  to  be 
settled  by  investigation,  by  a  cold,  unprejudiced  analysis 
of  accurate  data ;  the  issues  of  policy  are  a  matter  for  the 
individual  judgment  of  each  merchant  or  manufacturer, 
unless  the  policy  runs  counter  to  public  safety,  health, 
morals,  or  general  welfare ;  the  issues  of  theory  are  within 
the  province  of  definition  and  logic  and  demand  sound 
premises."  ("  Journal  of  Political  Economy,"  Volume 
XXIV,  p.  932.) 

Determining  the  Unit.  The  next  step  in  the  definition 
of  the  business  problem  is  to  fix  upon  some  definite  unit  in 
terms  of  which  the  phase  of  the  problem  may  be  expressed. 
The  kind  of  unit  will  very  largely  depend  upon  the  pur- 
pose in  view.  There  are,  in  general,  two  classes  of  units 
that  may  be  used.  There  is,  first,  the  unit  of  individual 
things.     This  is  determined  by  counting  the  actual  num- 


ANALYSIS  OF  BUSINESS  FACTS  197 

ber  of  individual  things  in  the  group.  There  are,  for 
example,  so  many  bushels  of  grain,  so  many  yards  of 
cloth,  so  many  dollars  in  money,  or  so  many  pounds  in 
weight.  The  other  kind  of  unit  is  called  the  measurable 
unit  and  is  to  be  applied  to  the  quantity  without  regard 
to  individuality.  Tliere  is,  for  example,  the  length  or  the 
capacity  of  a  container.  The  first  type  of  unit  has  two 
subclasses,  one  of  which  is  called  the  unit  of  "  natural 
kinds."  These  are  the  individuals  that  make  up  the  gen- 
erally accepted  groups  which  are  familiar  from  common 
observation.  Census  reports  that  give  the  number  of 
people  on  the  basis  of  age,  or  sex,  or  nationality,  may 
serve  as  illustrations.  It  is  clear  that  the  usual  method 
under  this  kind  of  unit  is  simply  counting.  The  results 
should  appear  in  the  form  of  precise  data.  It  is  unques- 
tionably true  that  facts  of  this  kind  have  the  highest  sta- 
tistical value.  The  second  kind  of  unit  under  this  group 
has  been  called  produced  kinds  and  produced  qualities  of 
things.  The  classification  on  this  basis  depends  upon  the 
purpose  in  view,  or  on  the  use  or  the  function  of  the  units. 
There  is,  for  example,  in  the  cotton  manufacturing  indus- 
try, the  spindle  which  is  used  as  a  basis  of  all  data  bearing 
upon  this  business.  In  the  handling  of  raw  cotton,  the 
five-hundred-pound  bale  is  likewise  the  unit  of  weight. 
In  the  construction  of  ships  all  progress  is  expressed  in 
terms  of  the  number  of  rivets  driven.  Clearly  these 
classes  are  not  fixed  or  objectively  definite.  They  have 
been  assumed  for  a  given  purpose  because  the  results  se- 
cured on  this  basis  are  most  intelligent  from  the  point  of 
view  of  this  unit. 

In  the  second  general  group  of  measurable  units,  there 
are  also  two  subclasses.  There  is,  first,  physical  measure 
such  as  the  length,  or  breadth,  or  capacity,  and  there  is 


198  COMMERCIAL  RESEARCH 

also  the  measure  in  terms  of  money  value.  In  the  case  of 
physical-measurement  units,  the  size  of  the  unit  is  merely 
the  result  of  accident  or  general  convention.  The  foot 
and  the  yard  and  the  mile  might  just  as  well  have  been 
other  terms  of  other  values.  In  Europe  people  speak  in 
terms  of  kilometers  and  we  speak  in  terms  of  the  mile. 
They  use  kilograms  and  we  use  pounds.  There  is  no  fun- 
damental reason  why  force  should  be  reduced  to  the  terms 
of  horse  power,  and  yet  such  is  the  general  acceptance  of 
this  country.  Practically  it  does  not  make  much  differ- 
ence what  the  unit  is  in  physical  measurements  of  this 
kind.  "  There  should  be  some  common  or  familiar  stand- 
ard. What  it  is,  matters  little."  (G.  P.  Watkins  quoted 
in  "  Copeland's  Business  Statistics,"  p.  34.)  It  should 
be  noted  also  that  measurements  of  this  kind  always  in- 
volve abstraction.  This  is  obvious  wlien  one  compares 
the  method  of  counting  individual  objects  with  the  method 
of  measuring  quantity.  The  final  unit  appears  in  terms 
of  monetary  value.  This  is  a  familiar  method  among 
business  men.  They  are  accustomed  to  express  in  terms 
of  dollars  and  cents  many  abstractions,  such  as  serv- 
ices of  labor  or  the  professional  advice  of  doctors  and 
lawyers. 

It  is  clear  from  this  general  survey  of  the  subject  that 
the  important  thing  is  to  select  the  kind  of  unit  which 
will  prove  most  serviceable  in  the  investigation  which  is  to 
be  made.  This  unit  should  be  clearly  defined  and  should 
be  of  such  character  as  to  permit  accurate  and  general 
comparison.  One  great  value  to  be  derived  from  com- 
mercial research  is  that  it  enables  merchants  and  manu- 
facturers to  compare  business  methods  and  business  costs 
in  order  that  waste  may  be  eliminated  and  more  efficient 
practices  may  be  obtained. 


ANALYSIS  OF  BUSINESS  FACTS  199 

It  is  not  always  an  easy  thing  to  discover  the  most 
serviceable  unit.  Take  the  matter  of  determining  the 
sales  quota  for  traveling  salesmen.  On  what  basis  should 
a  salesman  be  judged?  In  other  words,  what  is  to  be  the 
unit  of  measurement  for  him?  A  recent  investigation  into 
this  subject  was  made  upon  the  individual  salesman  who 
had  been  appointed  to  a  well-defined  district,  the  unit  of 
time  being  taken  as  one  year.  The  unit,  therefore,  is  a 
complex  one  and  is  made  up  of  the  individual  salesman, 
the  sales  district  which  he  is  to  cover  in  the  course  of  a 
single  year,  set  in  the  framework  of  the  countless  influ- 
ences at  work  in  that  field.  This  may  be  very  indefinite 
and  vague  and  may  prove  to  be  unfair  in  the  returns 
secured.  Another  investigation  had  for  its  purpose  the 
determining  of  the  annual  sales  of  the  average  sales  per- 
son. "  This  figure  has  been  obtained  by  dividing  the 
annual  net  sales  of  a  concern  by  the  average  number  of 
regular  sales  people,  certain  rough  but  fairly  well-tested 
equivalents  being  adopted  for  the  extra  sales  persons." 
("  Bulletin  of  the  Bureau  of  Business  Research,"  Harvard 
University,  No.  I,  p.  12.)  It  will  be  observed  once  more 
that,  in  this  case,  the  unit  is  not  a  single  or  simple  one 
but  is  made  up  of  several  parts.  The  more  complex  the 
unit,  the  more  difficult  will  be  its  application.  The  inves- 
tigation just  referred  to  divided  the  cities  of  the  country 
into  those  under  fifty  thousand,  and  into  rural  communi- 
ties. These  units  are  even  more  vague  and  indefinite  than 
the  others  that  have  been  mentioned.  It  is  possible  to 
classify  stores  on  the  basis  of  the  number  of  sales  people 
employed.  For  certain  purposes  this  might  prove  to  be 
the  best  possible  unit.  Another  way  of  looking  at 
the  same  business  concern  is  to  put  them  in  classes  on 
the  basis  of  the  amount  of  business  done  within  a  given 


200  COMMERCIAL  RESEARCH 

period.     This  unit  may  in  certain  cases  prove  to  be  the 
most  convenient. 

The  manufacturing  establishment  may  be  tested  on  the 
basis  of  machine  hour,  and  for  certain  purposes  this  unit 
may  prove  to  be  the  most  serviceable.  From  another 
point  of  view  it  may  be  judged  on  the  basis  of  the  labor 
hour  with  the  best  results.  Agricultural  implements  are 
dassified  on  the  basis  of  two  different  units ;  on  the  basis 
of  horse  power  and  on  the  basis  of  drawbar  power.  For 
certain  purposes  one  of  these  units  would  be  much  better 
than  the  other.  The  farmer  desires  to  know  the  capacity 
of  a  farm  tractor,  for  instance,  on  the  basis  of  its  drawbar 
power  and  not  its  horse  power.  To  him  it  makes  a  very 
essential,  practical  difference. 

Another  unit  for  judging  business  facts  is  the  percent- 
age unit.  This  is  probably  best  illustrated  by  the  govern- 
ment crop  reports.  These  returns  are  never  intended  to 
be  absolutely  accurate.  At  best  they  may  be  called  "  in- 
telligent estimates."  These  estimates  come  in  from  thou- 
sands of  individual  sources  where  experts  have  passed 
judgment  upon  crop  conditions.  These  experts  express 
their  judgment  in  terms  of  an  arbitrary  and  imaginary 
standard.  There  is  in  mind,  more  or  less  clearly,  an  ideal 
condition  in  the  development  of  certain  crops.  This  is 
called  "  100%."  It  means,  as  definitely  as  it  can  be  inter- 
preted, that  there  are  no  influences,  either  of  weather  or 
insects  or  climate,  to  hinder  the  normal  development  of 
the  farm  crop.  But  if  the  expert  can  detect  any  one  of 
these  influences,  a  certain  per  cent  is  subtracted  from  the 
ideal  condition.  A  report  on  the  wheat  crop  of  a  certain 
locality  may  be,  therefore,  expressed  as  "78%."  This 
means  that  the  judgment  of  the  expert  has  subtracted 
22%  from  the  ideal  condition  because  of  unfavorable  influ- 


ANALYSIS  OF  BUSINESS  FACTS  201 

ences  which  he  observed  in  the  grain  fields.  On  this  same 
basis  it  is  possible  for  a  crop  to  be  more  than  "  100%  '* 
perfect.  There  may  exist  extraordinary  conditions  for 
its  development.  The  grain  crop  in  Kansas,  for  example, 
ma}'  be  reported  as  "  104%." 

Such  figures  as  these  cannot  represent  absolute  values. 
Under  a  unit  of  this  sort,  everything  must  be  relative. 
This  method  of  expressing  values  is  always  comparative. 
Present  conditions  are  always  taken  in  relation  to  past 
conditions.  No  expert  on  farm  crops  could  have  any 
clear  conception  of  an  ideal  crop  condition  except  from 
past  experience.  Under  the  percentage  unit  of  value  such 
must  ever  be  the  condition.  If  the  manufacturer  or  mer- 
chant desires  to  use  this  unit,  he  will  have  in  mind  the  com- 
parison of  present  conditions  with  those  of  the  past.  For 
some  purposes  this  may  be  the  best  possible  unit  to  use. 

Elements  of  Error.  In  all  business  data  there  are  sure 
to  be  elements  of  miscalculation,  of  error.  One  primary 
duty  of  business  analysis  is  to  eliminate  in  so  far  as  pos- 
sible these  erroneous  characteristics.  There  is  a  general 
principle  now  in  business  that  no  salesman's  reports  on 
market  conditions  can  be  accurate.  "  The  principle  is 
as  old  as  the  hills  —  no  man  should  be  permitted  to  audit 
the  value  of  his  own  performances."  (E.  S.  Lewis,  "  In- 
dustrial Management,"  November,  1916,  p.  735.)  In  all 
business  statistics  of  this  character  the  bias  most  fre- 
quently found  is  self-interest.  The  difficult  problem  is 
how  to  eliminate  such  an  element  of  bias.  A  simple  method 
is  to  have  some  kind  of  a  check  on  the  facts  as  they  appear. 
It  is  possible,  for  instance,  to  make  a  different  grouping 
of  the  data.  If  it  is  possible,  the  check  that  should  be 
used  is  one  of  opposing  interests.  The  salesman,  for 
example,  desires  to  put  his  best  foot  forward.     He  is,  let 


202  COMMERCIAL  RESEARCH 

us  say,  temperamental  and  he  is  too  much  affected  by  the 
influences  in  his  market.  If  somebody  whose  interests  tend 
in  the  opposite  direction  could  present  some  data  for  com- 
parison, it  is  very  possible  that  one  set  of  facts  might  off- 
set the  error  in  the  other.  It  is  true  of  all  business  data 
that  "  the  total  can  be  no  more  accurate  than  its  most 
faulty  item." 

The  element  of  error  that  enters  into  business  statistics 
is  of  two  kinds.  One  is  called  the  unbiased  error  and  the 
other  is  called  the  biased  error.  The  latter  means  that 
the  element  of  error  running  through  the  data  tends  al- 
ways in  the  same  direction.  The  larger  the  number  of 
items,  therefore,  the  greater  will  be  this  error.  It  multi- 
plies itself  by  repetition.  It  is  obvious  that,  if  a  salesman 
is  influenced  by  self-interest,  if  he  overestimates  the  mar- 
ket, every  estimate  he  may  make  will  contain  the  same  kind 
of  error.  The  longer  he  goes  unchecked,  therefore,  the 
greater  will  be  the  sum  total  of  his  error  in  the  material. 

This  kind  of  an  error  is  illustrated  in  many  everyday 
experiences.  There  are,  suppose,  in  the  retail  store  the 
incorrect  scales.  Every  time  these  scales  are  used  the 
error  tends  to  accumulate.  Suppose  they  make  an  under- 
weight; then  on  each  purchase  by  the  customer  the  error 
runs  in  the  same  direction  and  continues  to  gather  in 
volume  the  longer  the  scales  are  used  and  the  more  fre- 
quently they  are  used.  In  case  the  error  is  in  tlie  oppo- 
site direction,  the  principle  holds  in  exactly  the  same  way. 
There  are,  also,  cases  of  careless  weighing,  particularly 
in  the  presence  of  a  customer.  Mere  carelessness  in  gen- 
eral might  tend  to  correct  itself  in  the  long  run  by  going 
astray  in  both  directions.  But  where  the  customer  is 
standing  before  the  counter  watching  with  keen  interest 
the  process  of  weighing  out  the  commodity  which  is  being 


ANALYSIS  OF  BUSINESS  FACTS  203 

purchased,  the  human  tendency  would  be  to  make  the 
weight  generous.  This,  too,  is  a  biased  error  tending 
always  in  the  same  direction  and  accumulating  a  greater 
volume  the  longer  it  goes  on.  In  many  retail  stores  there 
is  carelessness  about  the  measuring  of  cloth.  Where  a 
pattern  calls  for  so  many  yards  it  is  absolutely  essential 
that  this  quota  be  reached,  but  everything  over  is  of  no 
material  advantage.  Nevertheless,  there  might  be  again 
the  general  tendency  to  give  a  liberal  measure. 

An  instance  of  this  kind  of  error  has  recently  been 
found  in  the  experience  of  milk  dealers  in  one  of  our  large 
cities.  Some  of  these  dealers  have  built  bottling  plants 
in  the  country"  to  which  milk  is  carried  directly  from  the 
dairy  farm  and  where  it  is  weighed  at  the  time  of  purchase. 
In  this  case  all  the  milk  is  bought  by  standard  weight  on 
a  standard  basis  of  butter-fat  content.  Other  milk  deal- 
ers have  their  bottling  and  pasteurizing  plants  in  the  city, 
to  which  the  milk  is  shipped  by  the  dairymen  in  large  cans. 
These  milk  containers  have  been  carefully  standardized  so 
that  the  measure  is  sure  and  definite  so  long  as  it  is  in 
nowise  altered.  But  the  experience  is  that  these  milk 
cans  are  handled  in  a  careless  way,  especially  when  they 
are  returned  empty.  They  are  sometimes  thrown  on  the 
platform  or  on  the  ground,  and  as  a  result  receive  heavy 
dents  in  the  side.  After  a  little  use  these  cans  no  longer 
contain  a  standard  measure.  Experience  has  shown  that 
where  the  milk-can  measure  designates  sixty  gallons,  the 
actual  measure  will  reach  about  fifty-eight,  due  to  the 
denting  of  the  cans.  This,  again,  is  a  cumulative  error 
and  must  be  corrected  or  else  it  will  constantly  increase  to 
the  detriment  of  one  of  the  parties. 

To  offset  errors  of  this  sort  in  actual  business,  there 
has  come  a  strong  tendency  toward  the  use  of  standard- 


204  COMMERCIAL  RESEARCH 

ized  and  package  goods.  In  some  retail  establishments 
the  difficulty  is  met  by  actually  weighing  out  during  the 
periods  of  the  day,  when  few  customers  come  in,  such 
things  as  sugar,  coffee,  and  other  goods  bought  in  bulk. 
In  this  way  all  the  psychological  tendency  to  error  is 
eliminated.  It  may  be  said  that  all  wasteful  and  careless 
methods  in  retailing  will  contain  an  element  of  biased 
error,  and  that  careful,  standard  methods  will  tend  to 
counteract  these.  That  this  error  is  not  confined  to  any 
one  kind  of  business  activity  is  shown  by  the  fact  that  even 
construction  engineers  who  work  by  apparently  mathe- 
matically correct  formulas  always  insist  upon  adding  a 
percentage  of  error;  in  many  cases  this  is  a  ten-per  cent 
difference.  In  almost  all  kinds  of  well-organized  business 
there  is  a  percentage  of  safety  included  in  the  calculations. 
It  is  this  safety  factor  that  is  supposed  to  take  care  of  the 
cumulative  errors  in  the  business.  This  percentage  runs 
from  10%  to  25%.  In  one  business,  for  instance,  it  is 
claimed  that  there  is  a  margin  of  25%  through  which 
range  the  price  may  move  without  substantially  affecting 
either  the  producer  or  the  dealer.  Within  this  range 
there  is  a  possibiHty  of  undetected  error. 

The  unbiased  error  is  the  one  that  stands  an  equal 
chance  of  going  in  either  direction.  Where  it  is  impos- 
sible to  count  the  actual  units  under  consideration,  if  these 
units  are  selected  at  random  without  any  personal  interest 
or  other  single  influence  to  cause  a  drift  of  error  in  a 
given  direction,  the  resulting  figures  will  tend  to  be  repre- 
sentative of  the  total  number.  This  may  be  illustrated  by 
the  so-called  "  intelligent  estimates  "  made  by  the  Depart- 
ment of  Agriculture  on  crop  conditions.  In  this  case 
there  are  thousands  of  reporters  from  various  sections  of 
the  United  States  whose  judgments  are  individual  and  may 


ANALYSIS  OF  BUSINESS  FACTS  205 

miss  the  correct  deduction  either  by  an  overestimate  or  by 
an  underestimate  of  actual  conditions.  In  a  case  like  this 
there  seems  to  be  an  equal  chance  of  the  individual  judg- 
ment falling  on  the  side  of  the  overestimate  or  on  the  side 
of  the  underestimate.  Anotlicr  example  of  this  kind  of 
error  is  to  be  found  in  the  investigation  made  of  a  large 
city  market  by  one  of  the  leading  newspapers.  The 
method  used  here  was  to  divide  the  entire  city  into  dis- 
tricts ;  the  outlines  of  these  districts  being  determined  by 
such  conditions  as  the  nationality  groups,  or  economic 
groups,  or  by  simple  accident  of  physiography  such  as 
canals  and  river  and  factory  sections.  It  was  argued 
that  these  districts  would  be  representative  of  the  entire 
city,  because  the  errors  arising  from  certain  ones  would 
be  offset  by  errors  in  the  other  direction  arising  from  other 
districts.  When  an  examination  was  begun  of  the  charac- 
ter of  these  districts,  the  same  problem  arose  once  more. 
It  was  not  physically  possible  to  interview  every  human 
being  within  these  areas.  There  was  need,  therefore,  to 
select  certain  individuals  out  of  the  actual  number  and  to 
make  these  individuals  represent  the  whole.  Again  the 
argument  ran  that  this  basis  was  a  sound  one  for  judg- 
ment, since  the  individuals  were  selected  largely  by  chance 
and  therefore  the  likelihood  of  error  in  one  direction  was 
counteracted  by  the  likelihood  of  error  in  the  opposite 
direction. 

In  the  same  way  it  might  be  possible  to  test  the  charac- 
ter of  water  in  one  of  the  Great  Lakes  by  taking  a  quan- 
tity of  this  water  from  various  points  around  the  shore 
and  from  various  spots  in  the  middle,  mingling  these  all 
together,  and  testing  the  sum  total.  This,  it  is  claimed, 
would  give  a  fair  estimate  of  the  great  mass  of  water  in 
the  lake.     This  is  the  law  which  runs  through  all  things. 


206  COMMERCIAL  RESEARCH 

A  further  discussion  of  it  will  come  later  on.  The  pur- 
pose here  is  simply  to  illustrate  a  kind  of  error  which  is 
sure  to  rise  in  the  use  of  business  statistics.  Wherever  it 
is  possible  to  know  that  all  influences  working  to  accumu- 
late errors  in  a  single  direction  either  have  been  eliminated 
or  have  been  balanced  by  influences  working  in  the  oppo- 
site direction,  the  error  contained  in  the  material  may  be 
called  unbiased. 

Eliminating  Errors.  The  chief  problem  before  the  one 
engaged  in  commercial  research  is  not  merely  to  deter- 
mine the  kind  of  error  that  his  material  contains,  but  to 
eliminate  the  error  from  these  facts.  As  has  already 
been  said,  one  simple  method  of  correcting  the  biased  error 
is  to  change  it  into  the  unbiased  form.  If,  for  example, 
the  reports  of  a  traveling  salesman  or  any  other  inves- 
tigator are  discovered  to  contain  an  element  of  error  of 
this  kind,  where  self-interest  or  some  other  individual  fac- 
tor has  constantly  tended  to  accumulate  the  error  in  one 
direction,  it  is  not  difficult  to  overcome  this  trend  by 
checking  up  these  reports  from  other  sources  which  would 
tend  to  the  opposite  kind  of  error.  The  salesman,  or 
investigator,  may  be  overoptimistic.  If  so,  his  calcula- 
tions will  tend  to  be  too  large.  To  counteract  this  biased 
error  it  is  necessary  to  get  data  bearing  on  the  same  sub- 
ject from  some  source  that  will  tend  to  underestimate  the 
facts.  This  may  be  done  by  means  of  a  special  investi- 
gator, or  a  few  direct  questions  from  dealers  in  the  district 
may  bring  the  underoptimistic  facts  to  correct  the  error. 
If  there  is  no  other  way,  it  is  possible  to  discount  the  facts 
by  some  arbitrary  figure.  In  any  case  it  is  clear  that  the 
data  must  be  used  with  a  realization  of  the  error  which 
they  contain. 

Where  the  material  is  aff'ected  bv  the  unbiased  error. 


ANALYSIS  OF  BUSINESS  FACTS  207 

the  principle  to  be  kept  in  mind  is  that  the  larger  the 
number  taken,  the  smaller  will  be  the  final  error.  Where 
the  material  is  of  a  very  diverse  character,  it  is  necessary 
to  inspect  a  larger  representative  number  than  where  the 
material  is  more  nearly  homogeneous.  The  theory  under- 
lying this  method  is  that  there  is  an  equal  chance  for  the 
error  to  run  in  either  direction,  so  that  the  underestimate 
will  tend  to  equal  the  overestimate,  and  prove  representa- 
tive of  the  entire  number. 

It  is  with  these  two  kinds  of  errors  that  the  business 
investigator  must  cope.  His  first  duty  is  to  identify  the 
character  of  the  error  and  his  second  responsibility  is  to 
eliminate  its  effects  from  the  final  results.  Frequently  a 
use  of  commonsense  methods  will  be  a  sufficient  corrective. 
It  ma}^  be  necessary  sometimes,  however,  to  devise  new 
methods  in  order  to  overcome  the  errors  entering  into  the 
final  results.  It  will  be  a  test  of  ingenuity  to  discover  new 
and  satisfactory  corrective  measures.  The  mere  identifi- 
cation of  the  error  will  go  far  to  suggest  a  means  of  over- 
coming its  effect. 

Statistical  Averages.  "  Statistics,"  it  has  been  said, 
"  largely  deals  with  averages  and  these  averages  may  be 
made  up  of  individual  items,  radically  different  from  each 
other.  In  the  average  these  irregularities  all  are  swal- 
lowed up.  Methods  of  analysis  have  been  devised  which 
partially  obviate  this  defect,  but  no  system  which  makes 
a  large  and  complex  group  intelligible  to  the  mind  at  a 
glance  can  avoid  effacing  most  of  the  minor  irregularities. 
.  .  .  Statistics  from  the  very  nature  of  the  subject  cannot 
and  will  never  be  able  to  take  into  account  individual 
cases."  (W.  I.  King,  "  Elements  of  Statistical  Method," 
p.  34.)  The  term  average  is  a  familiar  one  in  the  lan- 
guage spoken  on  the  street.     Most  business  men  are  ac- 


208  COMMERCIAL  RESEARCH 

customed  to  think  in  terms  of  averages.  This  is  in  fact  a 
method  of  levehng  out  the  divergencies  of  the  complex 
economic  material  which  must  be  used  in  the  forming  of  a 
business  policy.  The  process  of  averaging  may  be  de- 
fined as  the  effort  to  reduce  data  to  a  common  standard  or 
level.  "  An  average,"  it  has  been  said,  "  represents  the 
culmination  of  a  process  of  thought."  (Secrist,  "  Intro- 
duction to  Statistical  Methods,"  p.  288.)  Since  the 
greater  part  of  business  facts  is  made  up  of  estimated 
values,  or  of  figures  based  upon  estimates,  the  use  of  some 
kind  of  average  is  essential  in  business  research. 

Business  facts  are  exceedingly  complex.  Many  of 
them  are  intangible  in  character;  they  are  constantly 
shifting  and  changing  because  business  itself  is  a  dynamic 
force.  Business  conditions  that  remain  constant  are  stag- 
nant conditions  and  are,  therefore,  not  to  be  desired.  A 
part  of  the  great  and  interesting  game  of  business  is  this 
element  of  change.  With  such  varied,  dissimilar,  and 
complex  data  one  can  deal  satisfactorily  only  by  means  of 
summarizing  expressions.  An  average  can  "  bring  to 
focus  in  a  single  expression  the  dissimilarities  and  pecul- 
iarities of  data."      {Ibid,  p.  377.) 

Because  of  this  character  of  business  facts,  men  are 
accustomed  to  reducing,  consciously  or  unconsciously, 
their  knowledge  to  some  kind  of  average.  The  human 
mind  cannot  at  one  time  visualize  a  great  mass  of  dis- 
similar facts.  At  least  no  judgment  can  be  determined 
until  these  facts  have  been  brought  to  a  focus.  It  may 
also  be  noted  that  the  essential  use  of  business  data  is  to 
make  comparisons.  If  one  is  to  learn  from  his  past  and 
present  experience  in  planning  for  the  future,  he  must 
make  these  comparisons  intelligently.  "  For  focusing  of 
judgment  which  comparison  requires,  concentrated  or  sum- 


ANALYSIS  OF  BUSINESS  FACTS  209 

mary  expressions  are  necessary.  We  seek  for  units  of 
analysis  here  as  we  sought  for  units  of  collection  earlier. 
Data  in  all  their  inclusiveness  and  in  all  their  detail  can- 
not readily  be  compared  as  between  periods,  times,  or  con- 
ditions. Some  single  expression  which  gathers  into  itself 
all  the  significant  characteristics  of  complex  data  is  re- 
quired. We  seek  in  actual  life  for  an  average  perform- 
ance, an  average  load,  an  average  student  or  clerk,  an 
average  day,  an  average  market,  average  conditions,  etc., 
in  order  to  bring  things  into  relation."  (Secrist,  "  Intro- 
duction to  Statistical  Methods,"  p.  235.) 

It  is  probably  the  case  that  the  business  man  is  con- 
stantly seeking  an  average  performance  not  for  that  aver- 
age in  itself,  but  in  order  that  he  may  use  it  as  a  stand- 
ard of  measurement  or  as  a  guide.  No  business  manager 
is  content  to  have  a  group  of  merely  average  sales  peo- 
ple. He  will  call  them  mediocre.  But  if  he  has  some 
data  for  determining  what  an  average  person  can  do,  he 
will  likely  use  this  as  a  minimum  standard  and  seek  to 
have  his  force  exceed  this  minimum  as  far  as  possible. 
The  average,  then,  becomes  to  him  a  kind  of  measuring 
rod. 

There  are  several  advantages  which  may  be  derived  from 
reducing  business  facts  to  some  kind  of  average.  The  first 
and  most  obvious  advantage  is  that  the  average  gives  a 
"  concise  picture  of  a  large  group."  This  enables  any 
one  interested  in  the  subject  to  grasp  at  a  single  glance 
the  significance  of  a  large  group  of  facts  which  would  re- 
quire a  long  period  of  time  for  individual  examination. 
Not  only  should  the  outlines  of  this  group  be  clearly  in 
mind  and  therefore  more  easily  grasped,  but  the  relation- 
ship of  these  facts  to  others  may  be  more  quickly  under- 
stood.    Another  advantage  arises  from  the  clearness  with 


210  COMMERCIAL  RESEARCH 

which  an  average  shows  the  characteristics  of  a  group. 
This  is  the  abihty  whieJi  is  afforded  for  comparing  one 
group  with  another,  no  matter  how  diverse  these  groups 
may  be.  Averages  must  rest  upon  the  common  standard, 
even  though  the  units  making  up  the  groups  are  very  dis- 
similar. A  further  advantage  is  secured  by  the  use  of 
averages  in  that  the  whole  group  has  been  reduced  to  an 
"  arithmetical  concept."  This  may  enable  the  mind  more 
readily  to  picture  the  data  than  would  be  possible  if  all 
the  individual  units  were  observed.  If  the  average  is  a 
correct  one,  it  is  possible  by  means  of  it  to  economize  time 
and  attention  by  using  the  specimen  data  which  it  affords 
rather  than  the  entire  group.  (Cf.  King,  "  Elements  of 
Statistical  Method,"  pp.  121-2.) 

There  are  several  kinds  of  statistical  averages  which 
may  be  used  in  business  investigation.  The  one  to  use 
in  any  particular  case  will  depend  very  largely  on  the 
purpose  in  view.  It  is  necessary,  however,  for  a  broad 
understanding  of  the  subject  to  know  the  character,  the 
limitations,  and  the  advantages  of  the  various  kinds  of 
averages  which  may  be  employed.  The  discussion  here 
will  treat :  first,  the  simple  arithmetical  average  or  mean ; 
second,  the  weighted  average ;  third,  the  index  number ; 
fourth,  the  median,  and  fifth,  the  mode. 

Arithmetic  Mean.  The  arithmetic  mean  is  easily  se- 
cured by  dividing  the  total  by  the  number  of  units.  If, 
for  instance,  there  are  twelve  items  of  varying  numerical 
value,  their  mean  is  obtained  by  adding  together  these 
items  and  dividing  by  twelve.  It  is  obvious  that  this 
method  of  obtaining  an  average  of  the  group  gives  to 
each  item  an  equal  value;  that  is,  each  one  of  the  twelve 
is  considered  as  a  single  unit  whatever  may  be  its  char- 
acter.    In  a  case  of  this  kind  the  total  possible  error  is 


ANALYSIS  OF  BUSINESS  FACTS  211 

equal  to  the  arithmetic  average  of  the  individual  errors. 
This  means  that  if  the  points  above  the  arithmetic  aver- 
age or  mean  are  marked  "  plus  "  and  those  below  are 
marked  "  minus  "  and  are  then  added  together,  the  final 
result,  whether  plus  or  minus,  will  give  the  average  error. 

This  simple  test  shows  very  clearly  the  working  of  the 
unbiased  error  in  business  statistics.  Those  items  which 
are  above  the  average  are  counteracted  at  least  in  part 
by  the  items  which  fall  below  the  average.  As  their  sum 
approaches  zero,  the  arithmetic  average  approaches  abso- 
lute accuracy.  This  test  also  reveals  the  degree  of  varia- 
tion that  exists  among  the  several  items.  If  these  varia- 
tions are  violent,  the  need  of  a  large  representative  num- 
ber becomes  apparent. 

The  advantages  which  an  average  of  this  kind  offers  are 
readily  seen.  In  the  first  place  it  is  not  difficult  to  find 
it.  The  whole  process  is  a  simple  one.  It  is  desirable, 
of  course,  to  use  a  principle  which  can  thus  be  easily  and 
accurately  established.  In  some  cases  it  may  be  desirable 
to  show  the  cases  of  extreme  variations  in  data.  When 
this  is  so,  the  fact  is  at  once  revealed  by  an  average  of 
this  kind.  Very  effective  use,  also,  has  been  made  of  the 
arithmetic  average  in  a  presentation  of  statistics  cover- 
ing the  entire  United  States.  The  Federal  Government 
has  computed  the  crop  production  on  the  basis  of  the 
arithmetic  average.  So  much  wheat  is  grown  in  the 
United  States  on  the  average  per  acre.  This  enables  a 
ready  comparison  with  foreign  countries,  but  of  course 
even  here  very  much  is  left  to  be  added  before  a  complete 
comparison  is  made.  This  average  is  frequently  used 
also  in  the  case  of  prices  or  in  the  case  of  rainfall. 

There  is  another  fact  in  favor  of  an  average  of  this 
character,   namely,   that   it   is    the   most   familiar   one   to 


212  COMMERCIAL  RESEARCH 

business  men.  Nobody  needs  to  explain  how  it  is  to  be 
obtained  or  what  it  is.  The  mind  runs  readily  enough 
into  averages  of  this  kind.  Very  excellent  use  is  made 
of  the  arithmetic  average  in  figuring  the  per-capita  con- 
sumption or  production  of  various  commodities.  If  the 
total  number  of  live  stock  in  the  country  is  ascertained 
from  government  reports,  and  the  total  number  of  people 
in  the  United  States  is  known,  it  is  possible  to  derive  the 
average  number  per  person. 

This  average  has  its  limitations.  Unless  the  extremes 
in  variations  are  known,  it  becomes  difficult  to  locate  the 
exact  mean.  Frequently,  also,  it  is  not  desired  to  empha- 
size extreme  variations.  In  such  a  case  the  arithmetic 
mean  will  not  serve.  When  the  items  in  the  group  can- 
not be  measured  in  the  same  units,  the  arithmetic  mean 
will  not  serve.  It  is  also  clear  that  this  average  is  a 
mathematical  abstraction ;  it  often  falls  at  a  figure  that 
represents  no  actual  case.  It  is,  for  instance,  absurd  to 
say  that  the  average  size  of  family  on  the  farms  in  the 
United  States  is  4.5  persons.  And  yet  the  arithmetic 
mean  may  make  necessary  the  use  of  such  figures. 

The  arithmetic  mean  or  average  has  frequently  been 
applied  to  wage  statistics.  In  most  cases  this  use  has 
been  misleading.  The  average  wages  in  the  steel  industry, 
for  example,  might  show  a  figure  which  in  fact  was  well 
above  the  amount  that  more  than  half  of  the  workers 
received,  due  to  the  very  large  wages  received  by  a  few 
skilled  workmen.  In  the  same  way  the  average  income  of 
the  inhabitants  of  a  small  town  might  be  increased  far 
above  the  ordinary  level  by  the  presence  of  a  single  mil- 
lionaire. Such  an  average,  therefore,  would  not  be  an 
indication  of  the  general  purchasing  power  in  that  com- 
munity.    It  would  obviously  give  a  wrong  picture. 


ANALYSIS  OF  BUSINESS  FACTS  213 

The  Weighted  Average.  There  are  cases  where  the 
simple  arithmetic  average  will  not  represent  the  facts 
fairly.  It  will  be  remembered  that  under  this  average 
every  item  is  of  equal  importance.  There  are  instances, 
however,  where  this  is  not  the  case.  Some  of  the  items 
are  of  much  greater  significance  than  others.  In  order 
to  give  expression  to  this  difference  in  value,  there  is  a 
modification  of  the  arithmetic  average.  This  modifica- 
tion is  called  the  weighted  average,  by  means  of  which  the 
aim  is  to  give  each  item  the  influence  that  its  varying  im- 
portance deserves. 

An  illustration  will  make  clear  the  distinction  between 
these  two  kinds  of  averages.  Suppose,  for  example,  one 
desires  to  calculate  an  average  price  of  a  certain  kind  of 
goods.  Assume  that  twenty  pounds  of  a  certain  com- 
modity are  sold  at  ten  cents  a  pound,  and  that  ten  pounds 
are  sold  at  sixteen  cents  a  pound.  Under  the  method  of 
calculating  the  arithmetic  mean,  or  average,  the  average 
price  would  be  found  by  adding  together  ten  and  sixteen 
and  dividing  by  two.  The  result  would  be  thirteen.  The 
conclusion,  then,  reached  under  this  method  is  that  thir- 
teen cents  is  the  average  price.  Obviously,  this  does  not 
represent  fairly  the  circumstances  under  which  the  goods 
were  sold.  Twenty  pounds  at  ten  cents  a  pound  may 
have  more  significance  than  ten  pounds  at  sixteen  cents 
a  pound.  In  order  to  give  these  items  the  influence  which 
their  varying  importance  deserves,  it  is  necessary  to  use 
a  weighted  average.  This  weighted  average  is  found  by 
the  following  method: 

20  pounds  @  10^  =  $2.00 
10        "        @  16^^=    1.60 

30       "  =$3.60 


214  COMMERCIAL  RESEARCH 

It  will  be  seen  that  30  pounds  is  the  total  jiumber  of  pounds 
sold  and  that  $3.60  equals  the  total  receipts.  If  now, 
the  $3.60  be  divided  by  30,  the  total  number  of  pounds 
sold,  the  result  will  equal  12,  the  weighted  average  price. 
The  difference  between  this  average  price  and  the  simple 
mean  price  found  under  the  former  method  is  one  cent. 
This  diifcrence  may  frequently  be  of  very  great  signifi- 
cance. 

It  will  be  noted,  however,  that  the  underlying  principle 
of  computation  in  determining  these  two  averages  is  the 
same.  The  difference  comes  in  treating  each  item  that 
goes  to  make  up  the  series.  In  the  case  cited  above  the 
twenty  pounds  were  multiplied  by  ten  in  order  to  give  this 
item  its  true  importance,  and  the  ten  pounds  were  multi- 
plied by  sixteen  in  order  that  this  item  might  be  reduced 
to  the  same  basis.  This  act  of  multiplying  each  of  the 
items  for  the  purpose  of  giving  each  its  true  significance 
is  called  weighting. 

There  are,  no  doubt,  many  cases  where  the  simple  arith- 
metic mean  will  serve  the  purpose  in  view  completely.  In 
other  cases  it  may  be  necessary  to  give  some  kind  of 
weight  to  the  individual  items.  An  example  of  where  the 
weighted  average  is  necessary  to  represent  the  case  fairly 
is  the  calculation  of  average  wages  among  workmen  of 
different  classes.  In  general,  where  there  is  a  wide  varia- 
tion in  the  items,  there  is  a  tendency  for  an  increased  use 
of  the  weighted  average.  Considerable  criticism  has  been 
offered  as  to  the  method  of  quoting  the  price  of  stocks 
on  the  exchanges  because  these  lists  do  not  represent  the 
weighted  average  and  thus  give  due  importance  to  the 
items  included.  It  makes  a  great  deal  of  difference 
whether  the  number  of  shares,  together  with  their  prices, 
are  given  due  weight  in  the  price  lists. 


ANALYSIS  OF  BUSINESS  FACTS  215 

A  very  curious  illustration  of  the  use  of  the  weighted 
average  is  to  be  found  in  the  method  of  the  United  States 
Weather  Bureau  where  it  computes  the  average  rainfall. 
In  this  case  a  weighted  average  is  used  and  the  weight, 
as  it  may  be  called,  the  element  which  is  used  to  give  true 
significance  to  each  item,  is  the  population  of  the  various 
districts  from  which  data  have  been  secured.  Thus,  the 
average  rainfall  in  the  United  States  in  1870  was  42.5 
inches,  and  in  1890  was  41.4  inches.  These  averages  do 
not  mean  that  less  rain  actually  fell  at  the  latter  date 
than  at  the  former  date.  It  might  well  be  that  more  rain 
fell  in  1890  than  in  1870,  but  measured  by  the  density 
of  population,  there  was  a  decrease  in  rainfall.  The 
reason  for  the  use  of  a  weighted  average  in  this  case  is 
clear.  The  rainfall  in  the  United  States  is  of  peculiar 
significance  in  its  relation  to  the  effect  upon  population. 
The  sparsely  settled  regions  are  thus  minimized.  The 
regions  of  great  concentration  of  population  are  thereby 
given  their  true  importance. 

Index  Numbers.  There  is  one  kind  of  weighted  average 
that  has  been  used  effectively  by  many  business  men  in 
showing  composite  results.  These  are  the  so-called  index 
numbers.  Such  numbers  are  reckoned  from  a  more  or 
less  arbitrary'  base  which  is  assumed  to  be  100  per  cent. 
From  this  base  the  index  numbers  may  vary  in  either 
direction  above  or  below.  This  device  has  been  used  most 
frequently  in  regard  to  prices,  but  it  has  a  wide  appli- 
cation. It  is  possible  to  reduce  to  an  index  number  such 
things  as  wages,  rent,  or  sales.  "  The  purpose  of  an 
index  number  is  to  reduce  to  a  common  denominator  the 
qualities  of  different  factors  or  phenomena  so  as  to  allow 
comparison  generallj^  historically.  It  is  to  translate 
absolute  into   relative   qualities,   in   order   that   compari- 


216  COMMERCIAL  RESEARCH 

sons  may  be  made."  (Secrist,  p.  287.)  Such  numbers 
as  these  are  always  used  to  show  relative  movements  or 
composite  forces.  In  order  that  data  may  be  reduced  to 
an  index  number,  they  must  have  common  qualities. 

The  constructing  of  an  index  number  need  not  be  a  diffi- 
cult matter.  A  single,  definite  unit  of  time,  for  instance, 
as  a  week,  or  month,  or  year,  may  be  taken  as  the  basis  for 
reducing  sales  to  index  numbers.  These  sales  may  be  of 
a  score  of  different  articles.  But  suppose  that  their  sum 
total  during  the  month  of  ]\Iarch  be  assumed  to  repre- 
sent 100  per  cent.  Then  with  this  as  a  base,  the  sale  of 
these  same  commodities  for  any  and  every  other  month 
may  be  charted.  Such  a  device  as  this  does  not,  of  course, 
solve  any  business  problems.  It  cannot  show  the  details 
of  the  situation.  The  very  best  that  it  can  do  is  to  pic- 
ture with  a  high  degree  of  vividness  the  tendency.  The 
main  purpose  of  index  numbers  is  to  show  general  drift. 

The  business  man  in  taking  up  his  problem  must  con- 
sider it  from  the  point  of  view  of  the  value  or  importance 
of  the  particular  items.  It  is  necessary  to  inquire  first 
whether  a  simple  mean  or  average  will  show  all  that  needs 
to  be  shown  in  the  analysis  of  the  material.  No  general 
rule  can  be  offered  that  will  cover  all  cases.  The  question 
can  be  answered  only  by  a  knowledge  of  the  facts  and  of 
the  purpose  in  view.  A  thorough  understanding,  how- 
ever, of  the  two  kinds  of  averages  and  the  methods  by 
which  they  are  determined  should  prove  of  great  help  in 
deciding  which  one  is  to  be  used  in  any  given  case.  "  The 
question  whether  weights  are  to  be  used  or  not,  cannot, 
therefore,  be  decided  in  general.  The  answer  depends  on 
the  question  of  the  relationship  between  the  items  and 
their  weiglits."      (Zizek,  "  Statistical  Averages,"  p.  163.) 

The  Median.     Another  kind  of  statistical  average  which 


ANALYSIS  OF  BUSINESS  FACTS  217 


||§siSggSg|g§2||gggs|gg33 


gl8 


COMMERCIAL  RESEARCH 


Fig.  la 


has  been  developed  particularly  in  the  study  of  mortality 
figures,  is  the  so-called  median.  In  order  to  determine 
this  average  it  is  necessary  to  arrange  all  the  items  ac- 
cording to  some  standard.     This  standard  may  be  of  any 


ANALYSIS  OF  BUSINESS  FACTS  219 


TREND  OF  PRICES  PAID  FARMERS 
FOR  BEEF  CATTLE 

May  15,  1914,  to  May  15,  1917 

Based  on  Average  Prices  throughout  the  United  States  as  Quoted  by  tho 
U.  S.  Dept.  of  Agriculture 


Fig.  lb 


220 


COMMERCIAL  RESEARCH 


TREND  OF  PRICES  PAID  FARMERS 
FOR  HOGS 

May  15,  1914,  to  Ma;  15.  1917 

Based  on  Average  Prices  throughout  the  United  States  as  Quoted  by  the 
U.  S.  Dept.  of  Agriculture 


Fig.  Ic 


ANALYSIS  OF  BUSINESS  FACTS  221 

kind,  but  it  must  be  of  such  character  that  the  items  will 
form  a  series.  For  example,  men  may  be  arranged  in  the 
order  of  their  height  and  thus  form  a  series  based  upon 
that  standard.  In  this  case  it  will  be  seen  that  the  items 
are,  in  the  first  place,  of  the  same  class,  and  in  the  second 
place,  of  varying  quantit}^  on  the  basis  of  the  standard 
used.  All  other  characteristics  of  the  individuals  have 
been  eliminated  for  the  purpose  of  comparing  them  on  the 
basis  of  this  one  standard.  If  a  group  of  individuals  has 
been  arranged  in  a  scries  of  this  kind  the  individual  that 
holds  the  central  position  in  the  series  is  called  the  median. 
It  is  obvious  that  if  there  is  an  odd  number  of  individuals 
in  the  series,  the  middle  one  becomes  the  median.  If,  how- 
ever, the  series  is  made  up  of  an  even  number  of  individ- 
uals, this  median  lies  between  the  two  middle  ones.  In 
this  case  the  exact  median  can  be  found  only  by  calculat- 
ing the  arithmetic  average  of  these  two. 

This  median  may  be  called  the  central  figure  in  the 
series  arranged  on  the  basis  of  some  chosen  standard. 
Statisticians  have  sometimes  pointed  to  the  median  as  the 
probable  value  of  the  whole  number  of  observations  taken. 
In  this  sense  the  median  becomes  a  representative  number 
of  all  the  data  that  have  been  accumulated.  This  aver- 
age may  well  be  termed  the  halfway  house.  If  one  is  climb- 
ing a  hill  and  finds  halfway  up  the  face  of  this  hill  a  rest- 
ing place,  he  may  appreciate  this  fact  very  greatly  be- 
cause of  the  relief  wliicli  it  brings  him.  He  ma}'  also 
carry  away  from  his  experience  of  hill  climbing  a  very 
comfortable  sense  of  this  halfway  house.  It  has  a  defi- 
nite meaning  for  him  in  his  climbing  experience.  When 
he  descends  he  maj'  look  forward  to  this  place  as  marking 
the  halfway  station  in  the  descent.  Nevertheless,  it  must 
be  noted  that  this  halfway  house  gives  no  indication  of 


222  COMMERCIAL  RESEARCH 

the  steepness  of  the  hill,  either  above  or  below.  The  onl}^ 
thing  that  it  does  indicate  is  that  half  the  hill  lies  above 
and  half  the  hill  below.  One  must  know  the  entire  jour- 
ney to  have  any  clear  understanding  of  the  roughness  or 
steepness  or  difficulty  of  the  way. 

The  median  has  certain  advantages  over  the  arithmetic 
mean  in  that  it  is  wholly  independent  of  extreme  cases. 
In  this  sense  the  median  may  be  said  to  be  more  typical 
than  the  mean.  Take,  for  example,  the  average  incomes 
of  a  large  group.  Under  the  calculation  of  the  arithme- 
tic average  the  income  of  the  millionaire  will  balance  hun- 
dreds of  incomes  of  the  laborers.  The  importance,  there- 
fore, of  these  individual  items  is  lost  to  view.  With  the 
median  on  the  other  hand,  the  millionaire  has  no  more 
importance  than  any  other  individual.  It  may  be  said  in 
general  that  the  median  is  just  as  characteristic  of  any 
group  as  the  arithmetic  mean  and  is  much  easier  to  de- 
termine.     (Zizek,  "  Statistical  Averages,"  p.  199.) 

To  the  business  man  this  type  of  average  may  become 
of  practical  importance  in  attempting  to  calculate  the 
typical  price  or  a  fair  and  reasonable  sales  quota,  or  in 
representing  the  reasonable  requirements  as  to  the  size  of 
territory  to  be  covered  or  as  to  the  number  of  miles  to  be 
traveled  by  a  salesman.  If  the  different  items  appearing 
upon  these  points  are  arranged  in  a  series  and  the  central 
item  is>  selected  as  the  typical  or  reasonable  or  fair  stand- 
ard, the  judgment  may  well  be  a  sound  one.  One  statisti- 
cian has  said  that  "  on  the  whole  the  median  is  one  of  the 
most  valuable  types  for  practical  use  and  for  studies  such 
as  wages  or  distribution."  (King,  "  Elements  of  Statis- 
tical Method,"  p.  132.) 

It  should  be  pointed  out,  however,  that  the  median 
should  be  carefully  examinc^d  in  order  to  see  whether  part 


ANALYSIS  OF  BUSINESS  FACTS  223 

of  the  data,  as  a  central  figure  or  middle  point,  is  in  any 
way  extreme  in  relation  to  the  number  of  items.  Obvi- 
ously, if  this  central  item  stands  out  as  being  unique  in  any 
respect  from  all  the  items  surrounding  it,  its  typical  char- 
acter is  gone.  As  a  matter  of  fact  the  median  is  charac- 
teristic or  typical  only  if  it  occurs  at  a  point  of  concen- 
tration. If  this  is  the  case,  and  if  the  median  is  typical 
or  characteristic  of  the  entire  group,  then  it  may  serve 
as  an  efficient  method  of  reducing  to  a  single  figure  a  very 
large  group  of  data  and  may  aid  in  visualizing  more 
clearly  and  in  studying  more  carefully  the  mass  of  vary- 
ing material. 

There  are  some  cases  where  this  kind  of  average  is 
the  only  one  that  can  be  used.  These  cases  occur  where 
it  is  not  possible  to  reduce  all  the  items  to  figures.  If  the 
facts  are  not  all  definite,  or  are  uncertain  in  regard  to 
some  specific  items,  the  median  then  comes  in  to  aid  the 
investigator  to  overcome  these  difficulties.  (Cf.  W.  C. 
Mitchell,  "  Gold,  Prices  and  Wages  On  The  Greenback 
Standard  " ;  Ii-ving  Fisher,  "  The  Purchasing  Power  of 
Money  ";  Edgeworth,  "  Report  of  British  Association  for 
the  Advancement  of  Science,"  1881,  p.  91.)  A  good  ex- 
ample of  this  kind  of  situation  is  to  be  found  in  the  re- 
ports on  the  trade  conditions  that  are  frequently  pub- 
lished by  financial  and  commercial  papers  and  magazines. 
These  reports  do  not  come  in  the  form  of  numbers  but 
as  vague  and  general  terms,  such  as  "  good,"  "  fair," 
"excellent,"  "slow,"  "poor,"  "bad,"  etc.  Obviously, 
terms  of  this  character  cannot  be  dealt  with  in  the  same 
way  as  figures.  If,  however,  some  sufficiently  definite  idea 
may  be  attached  to  each  term,  then  these  terms  may  be 
arranged  in  scries  of  which  the  central  one  will  be  the 
median.     On  the  basis  of  this  series  a  tabulation  may  be 


224  COMMERCIAL  RESEARCH 

made  and  the  typical  or  characteristic  condition  deter- 
mined. 

As  an  example  of  the  median  there  is  given  below  some 
figures  representing  the  range  of  prices.  It  is  to  be  noted 
that  these  figures  are  in  a  series  with  the  lowest  one  first 
and  then  rising  step  by  step  to  the  highest.  In  this  case 
the  fifth  item  is  the  median ;  that  is,  .$4.00.  It  may  be 
noted,  also,  that  this  figure  is  $2,00  greater  than  the 
smallest  item  and  $4.00  less  than  the  largest  item.  Fur- 
thermore, the  differences  between  the  various  items  are 
not  the  same.  In  this  series,  also,  every  item  has  the 
same  importance. 

$2.00 

3.00 

3.00 

3.50 

4.00 

4.50 
5.00 
6.00 
8.00 

It  may  be  observed  further  that  the  individual  items  in 
this  series  may  change,  but  so  long  as  the  order  remains 
the  same,  the  median  will  remain  the  same.  The  median 
differs  from  the  arithmetic  average  in  this  case  appre- 
ciably. The  latter  would  be  $4.33.  (Cf.  Secrist,  p. 
256.) 

The  Mode.  Another  type  of  statistical  average  is 
called  the  mode.  This  means  the  point  of  greatest  con- 
centration or  frequency  in  a  series  of  items  arranged  ac- 
cording to  some  selected  standard.  It  represents  the 
greatest  number  of  experiences.     Sometimes  the  mode  is 


ANALYSIS  OF  BUSINESS  FACTS  225 

called  the  predominant,  the  most  usual,  or  normal  value. 
It  is  the  value  occurring  most  frequently  in  a  series  of 
items  and  around  which  other  items  are  distributed  most 
densely.  "  Therefore,  the  mode  represents  the  most  prob- 
able value  of  the  element  of  observation  represented  in  the 
series."      (Zizek,  "Statistical  Averages,"  p.  222.) 

It  may  be  seen  that  this  kind  of  an  average  has  one 
thing  in  common  with  the  median.  The  items,  for  exam- 
ple, are  arranged  in  a  series  according  to  some  selected 
standard,  and  on  the  basis  of  this  standard  the  mode  is 
determined.  The  number  of  items  in  this  series  must  be 
sufficiently  great  to  reveal  a  point  of  density  or  concen- 
tration. Clearly,  the  more  numerous  the  items,  the  more 
exactly  can  the  mode  be  determined. 

There  are  many  advantages  in  the  use  of  this  type  of 
average.  In  the  first  place,  the  mode  is  never  a  mere 
abstraction  as  the  arithmetic  mean  or  median  may  be. 
These  latter  averages  may  never  actually  occur  in  the 
series.  The  mode  must  always  be  represented  by  some 
item.  Furthermore,  the  mode  must  always  be  typical. 
With  many  irregularities  in  the  items  the  arithmetical 
mean  and  the  median  may  not  be  typical.  And  again, 
"  the  importance  of  the  mode  lies  in  the  fact  that  it  is  the 
average  best  suited  to  represent  the  '  normal '  or  typical 
size  of  a  variable  phenomenon."  (Zizek,  "  Statistical 
Averages,"  p.  225.)  The  mode  is  also  useful  where  it  is 
desired  to  eliminate  extreme  variations.  It  is  convenient, 
too,  because  in  locating  the  mode  it  is  not  necessary  to 
know  anything  about  the  extreme  items  except  that  they 
are  few  in  number.  This  form  of  average,  also,  may  be 
determined  with  reasonable  accuracy  from  relatively  few 
but  well-selected  data.  And,  finally,  the  mode  as  a  type 
is  the  one  most  familiar  to  the  popular  mind  as  best  rep- 


226  COMMERCIAL  RESEARCH 

resenting  the  entire  group.  (Cf.  W.  I.  King,  "  Elements 
of  Statistical  Method,"  p.  126.) 

The  mode,  however,  has  very  distinct  limitations.  It 
is  not  always  easy  to  locate.  In  fact,  in  a  given  series 
of  items  there  may  be  more  than  one  point  of  concentra- 
tion. It  is  conceivable  that  there  may  be  two  or  more 
points  in  a  given  series,  of  equal  density  or  equal  concen- 
tration and  therefore  with  equal  claims  to  representing  the 
mode.  In  case  the  desire  is  to  give  due  weight  to  extreme 
variations,  the  mode  is  not  of  service.  It  is,  furthermore, 
not  possible  to  locate  the  mode  by  a  simple  arithmetic 
process,  and  sometimes  it  can  be  identified  only  with  very 
great  difficulty  by  any  method.  Wherever  too  few  items 
are  included  in  the  series  the  mode  is  not  typical. 

This  method  of  average  is  of  the  very  greatest  value  to 
one  engaged  in  commercial  research.  Its  application  is 
very  wide  and  very  easy  to  make.  As  a  matter  of  fact, 
the  mode  offers  the  standard  by  which  all  practices  may 
be  judged.  The  so-called  "  average  "  or  common  or  typ- 
ical experience  is  the  mode.  In  a  recent  investigation  into 
"  the  expenses  in  operating  retail  grocery  stores,"  the 
data  were  all  reduced  to  a  mode.  For  example,  when 
the  subject  of  salaries  and  wages  paid  to  the  sales  force 
in  such  stores  was  being  discussed,  the  conclusions  drawn 
were  of  this  kind.  "  The  bulk  of  the  figures  are  between 
4%  and  8%,  concentrating  around  6.5%.  A  sufficient 
number  of  stores  spend  only  5%  of  their  net  sales  for 
salaries  and  wages  of  sales  force  to  indicate  that  that 
figure  is  ordinarily  possible  of  attainment."  (Bulletin 
No.  5,  Bureau  of  Business  Research,  Harvard  University, 
p.  8.)  In  a  similar  way  the  data  on  advertising  expense 
were  summarized  by  saying  "  the  common  figure  is  one 
tenth  of  one  per  cent."     {Ibid.,  p.  9.)      In  all  other  cases 


ANALYSIS  OF  BUSINESS  FACTS  227 

the  items  were  reduced  to  the  same  average.  For  exam- 
ple, it  is  said  that  "  the  total  delivery  expenses  ranged 
from  1.1%  to  5.9%  and  the  typical  figure  is  3%  "  (Ibid.), 
"  the  common  figure  for  rent  expense  in  retail  shoe  stores 
is  5%,  in  retail  grocery  stores  1.3%."  "  The  most  com- 
mon figure  "  of  total  expense  in  these  stores  is  16.5%  with 
a  "  marked  concentration  of  a  smaller  group  of  stores 
around  13%."  "Net  profit  annually  ranges  between 
2.5%  and  5.5%  of  net  sales,  with  4.5%  probably  as  a 
most  typical  figure."  "  The  common  figure  for  interest 
seems  to  be  0.8%  with  probably  a  tendency  to  be  lower 
than  higher."  "  In  a  majority  of  stores  of  this  class  the 
annual  stock  turn  is  from  four  to  ten,  centering  around 
seven,  which  is,  therefore,  the  common  figure."      (Ibid.) 

The  mode  is  a  method  of  calculation  familiar  to  the 
business  man  even  though  he  does  not  use  this  term  to 
express  it.  If  he  speaks  of  the  normal  rate  of  interest, 
or  the  common  wage,  or  the  usual  price,  he  has  in  mind 
something  which  corresponds  to  the  mode.  As  has  been 
said,  "  the  statistical  usage  agrees  with  the  common  usage. 
If  non-statisticians  speak  of  a  normal  wage,  normal  in- 
come, normal  price,  etc.,  they  undoubtedly  think  of  the 
relatively  most  frequent  wage,  income  or  price.  The 
same  average  is  in  mind  when  we  speak  of  the  size  of  an 
agricultural  estate  or  establishment  as  typical  for  a  cer- 
tain district."     (Zizek,  "  Statistical  Averages,"  p.  227.) 

"  The  mode  is  of  special  importance  since  it  is  that 
average  which  is  easiest  to  estimate  and  therefore  can 
easiest  be  obtained  in  an  investigation  by  direct  question- 
ing. It  has  been  mentioned  that  in  investigations  the 
questions  asked  are  frequently  for  the  '  predominant,' 
*  prevailing,'  '  normal,'  or  '  usual '  price  or  wage,  and 
these  questions  are  asked  of  persons  who  are  considered 


228  COMMERCIAL  RESEARCH 

to  be  especially  competent  to  estimate  the  normal  wage 
and  usual  price  on  the  basis  of  their  experience."  {Ibid., 
p.  245.)  Since  the  mode  can  thus  be  closely  approached 
by  judgment  rather  than  by  actual  computation,  it  lends 
itself  most  readily  to  general  business  usage.  This  form 
of  average  can  be  closely  guessed  by  one's  own  experience, 
even  though  he  is  not  an  expert  in  business  investigations. 
The  man  who  has  had  experience  in  business  investigation 
or  whose  general  business  training  has  been  broad  and 
varied  can  estimate  with  reasonable  accuracy  this  type 
of  average  from  memory  of  his  previous  experience. 
Whether  such  an  average  will  form  a  sound  basis  of  busi- 
ness policy  will  depend  upon  the  carefulness  and  capacity 
of  the  individual  who  makes  it. 

The  method  by  which  the  mode  is  determined  may  be  il- 
lustrated by  the  following  example :  "  The  study  of  137 
different  makes  (of  farm  tractors)  indicates  that  there  is 
very  little  unanimity  of  opinion  as.  to  what  power  rating 
a  tractor  should  have.  Of  the  137  makes  the  largest 
number  at  any  one  rating  was  9,  and  the  striking  thing 
about  the  chart  of  tractor  ratings  is  the  56  makes,  each 
of  which  has  a  rating  different  from  every  other."  (See 
chart  on  the  following  page.  "  The  Merchandising  of 
Tractors,"  p.  15.)  It  becomes  clear  that  the  figures  be- 
hind this  quotation  have  been  arranged  on  the  basis  of 
"  ratings,"  which  means  the  horse  power  of  the  tractor 
at  the  drawbar.  Then  on  this  common  basis  the  material 
has  been  classified  in  order  to  show  the  point  of  greatest 
concentration.  These  points  are  illustrated  by  the  chart. 
Another  example  may  be  seen  from  the  chart  of  hours 
of  horse  labor  demanded  on  the  farm.  The  mode  in  this 
case  appears  in  the  last  week  in  May.     The  common  basis 


ANALYSIS  OF  BUSINESS  FACTS 


229 


230 


COMMERCIAL  RESEARCH 


JUL. 


H0UR5  or  NOnSC  LABOR 


Fig.  lib 

of  classifying  the  material  may  be  readily  seen  from  the 
grapli.      (Ibid.) 

The  Sampling  Method.  There  is  a  term  familiar  in 
business  circles  which  applies  to  the  forming  of  a  judg- 
ment respecting  a  whole  group  from  certain  selected  indi- 
viduals of  that  group.  It  is  a  method  by  which  a  part 
is  made  to  represent  the  whole.  In  principle  it  does  not 
differ  from  other  methods  of  identifying  typical  or  repre- 
sentative items.     This   method   is   called   sampling.     The 


ANALYSIS  OF  BUSINESS  FACTS  231 

word  has  several  different  meanings  as  used  in  business. 
Selling  by  sample  means,  of  course,  that  the  items  in- 
spected are  exactly  representative  of  the  large  class  which 
has  been  made  on  the  same  pattern.  The  salesmen's  sam- 
ples from  which  orders  are  made  are  supposed  to  be 
accurate  in  this  respect.  Many  commodities  are  graded 
on  the  basis  of  samples  taken.  A  bale  of  cotton,  for  illus- 
tration, is  sampled  by  taking  a  handful  of  cotton  from  the 
bale  by  cutting  through  the  wrapping  and  reaching  in 
and  selecting  in  a  chance  way  whatever  the  fingers  touch. 
On  the  basis  of  such  a  sample  the  entire  bale  is  graded. 
Carloads  of  grain  are  likewise  graded  from  samples  taken 
from  the  car.  These  samples  are  carefully  analyzed  by 
experts  and  placed  in  grades  as  their  characteristics  war- 
rant. The  entire  car  is  classified  on  the  basis  of  these 
samples. 

As  a  statistical  method,  however,  sampling  is  a  differ- 
ent matter.  It  is  true  tliat  even  here,  since  the  sample  is 
taken  to  represent  an  entire  group,  the  assumption  is  that 
this  sample  is  typical  for  the  group  from  which  it  is  taken. 
In  other  words,  the  characteristics  of  the  sample  are  an 
average  for  the  group.  This  method  of  reaching  an  aver- 
age differs  from  the  mode  in  that  every  sample  must  be 
individually  examined,  regardless  of  where  it  may  belong 
in  any  series.  It  differs  from  the  median  in  the  same 
'wsiy.  The  sample  is  not  either  a  weighted  average  or  a 
simple  arithmetic  average.  The  assumption  is  that  these 
samples  or  specimens  will  contain  every  cliaracteristic 
to  be  found  in  the  entire  group.  No  one  of  them  is  to  be 
taken  as  in  itself  typical  or  representative.  They  are 
to  be  considered  together,  really  as  a  single  unit,  repre- 
senting all  the  elements  which  will  be  found  in  the  whole 
group  from  which  they  have  been  taken. 


232  COMMERCIAL  RESEARCH 

This  method  is  resorted  to,  first,  when  it  is  impossible 
to  examine  every  item  of  the  group,  and  second,  when  it 
is  too  costly  or  is  impracticable  to  attempt  this  individual 
investigation.  A  manufacturer,  for  instance,  will  test  his 
market  as  a  whole  by  selecting  a  sample  territory  or  dis- 
trict. The  results  in  this  selected  district  will  be  taken 
as  the  possible  results  to  be  obtained  from  the  market  as 
a  whole.  It  may  be  too  expensive  to  reach  the  entire 
possible  market  at  once.  Or,  again,  a  merchant  may  try 
out  his  prospective  customers  by  sending  test  letters  to 
certain  individuals.  Their  response  will  be  taken  as  the 
basis  of  judging  the  entire  group.  It  is  a  method,  there- 
fore, which  may  become  extremely  useful  if  one  can  be 
sure  that  it  is  used  properly. 

In  order  that  the  sample  method  may  be  valid,  it  is 
necessary  that  it  be  used  with  caution.  In  the  first  place, 
great  care  must  be  taken  in  selecting  the  samples.  The 
real  danger  in  the  use  of  the  sampling  method  is  that  a 
biased  error  may  appear  in  the  individuals  selected.  They 
should  be  chosen  with  a  view  to  avoiding  this  possibility. 
The  method  of  selection  should,  therefore,  be  of  such  a 
kind  as  to  eliminate  any  chance  of  prejudice  or  self- 
interest  or  any  other  influence  that  will  accumulate  error 
in  any  one  direction  from  entering.  In  the  second  place, 
the  number  of  samples  chosen  should  be  sufficiently  numer- 
ous to  be  representative.  The  entire  analysis  by  the 
sampling  method  is  an  analysis  for  the  purpose  of  elimi- 
nating error  from  business  data. 

A  recent  survey  was  made  by  the  United  States  Depart- 
ment of  Agriculture  into  farmers'  incomes.  Certain 
groups  of  farms  were  investigated  in  three  different  dis- 
tricts. When  the  survey  was  made  it  was  found  that 
these  incomes  could  not  be  said  to  be  typical  or  repre- 


ANALYSIS  OF  BUSINESS  FACTS  233 

sentative  because  the  groups  interviewed  were  of  a  su- 
perior type  of  farmer.  The  sample  incomes,  therefore, 
did  not  represent  fairly  the  general  farm  income.  In 
other  words,  there  was  a  biased  error  in  the  material 
collected.  It  became  necessary  to  deduct  from  the  fig- 
ures a  certain  arbitrary  percentage  in  order  to  reduce 
the  data  to  a  typical  form.  Another  investigation,  into 
retailing  business,  found  that  the  retailers  who  could  fur- 
nish the  desired  information  belonged  to  the  higher  type 
of  business  men.  Here,  again,  there  was  a  biased  error 
in  the  material  and  it  became  necessary  to  make  it  repre- 
sentative. Many  periodicals  have  used  this  method  in 
determining  the  attitude  of  their  readers  toward  certain 
commodities  advertised  in  their  columns.  It  has  not  al- 
ways been  possible  to  eliminate  from  these  investigations 
the  biased  error  due  to  personal  interest  on  the  part  of 
the  periodicals  which  naturally  desire  to  show  the  su- 
perior value  of  their  papers  as  an  advertising  medium. 
Sampling  can  onl}^  be  a  useful  method  when  it  is  used  with 
care  and  when  the  material  has  been  selected  on  the  proper 
basis.  When  properly  and  carefully  handled,  it  may 
prove  of  great  practical  service. 

Conclusion.  In  this  survey  of  the  methods  by  which 
business  material  may  be  analyzed  the  various  methods 
developed  by  the  science  of  statistics  have  been  passed  in 
review.  These  methods  have  been  defined,  their  advan- 
tages and  disadvantages  have  been  discussed,  the  means 
by  which  they  may  be  determined  have  been  illustrated. 
The  purpose  in  view  was  to  make  clear  and  serviceable  all 
the  tested  methods  of  arriving  at  a  thoroughly  sound 
and  practical  analysis  of  the  material  that  had  been 
accumulated.  From  this  survey  certain  general  princi- 
ples may  be  derived  that  will  aid  in  judging  the  sound- 


234  COMMERCIAL  RESEARCH 

ness  of  the  method  of  analysis  and  possibly,  also,  will 
assist  in  determining  what  method  should  be  used  in  any 
given  case. 

There  is  in  statistics  a  general  law  which  is  called  the 
law  of  averages.  It  may  be  stated  as  follows :  "  A  mod- 
erately large  number  of  items  chosen  at  random  from 
among  a  very  large  group  are  almost  sure  on  the  average 
to  have  the  characteristics  of  the  group  as  a  wliole."  This 
has  sometimes  been  called  the  law  of  probability,  or  "  the 
statistical  law  of  regularity."  It  may  be  seen  that  such 
a  principle  as  this  underlies  the  whole  assumption  of  un- 
biased error.  It  is  likewise  fundamental  to  the  sampling 
method.  Such  a  principle  needs  no  demonstration  other 
than  that  given  it  by  general  human  experience.  The 
gambler  with  his  dice  counts  upon  the  working  of  this 
law.  But  the  gambler  is  only  a  conspicuous  example  of 
a  general  custom. 

Another  general  principle  assumed  in  statistical  anal- 
ysis of  this  character  is  that  all  individual  items  of  what- 
ever kind  have  common  characteristics,  no  matter  from 
which  point  of  view  they  are  judged.  That  is  to  say,  all 
things  are  to  be  classified  by  some  principle.  Every  sta- 
tistical average  is  based  upon  a  principle  of  this  kind. 
The  group  of  items  which  has  not  or  cannot  be  examined 
individually  is  judged  on  the  basis  of  this  principle. 

From  the  two  general  principles  stated  above  it  will 
follow  first,  that  the  larger  the  number  taken,  provided 
there  is  no  biased  error,  the  smaller  will  be  the  final  error 
in  the  data.  And  also  it  follows  that  when  one  part  of  a 
group  varies  in  one  way,  the  other  part  will  vary  in  the 
other  way,  so  that  the  total  change  is  slight.  Such  con- 
clusions as  these  should  not  prevent  one  from  observing 
that  there  may  be  a  general  increase  or  decrease  not  taken 


ANALYSIS  OF  BUSINESS  FACTS  235 

care  of  by  these  assumptions.  In  the  United  States,  for 
example,  which  is  a  country  that  has  been  rapidly  devel- 
oped within  the  past  few  years,  all  statistical  data  must 
take  into  consideration  the  fact  that  there  is  a  general 
change  in  business  conditions.  As  all  parts  of  the  coun- 
try become  more  fully  developed  a  kind  of  business  equili- 
brium may  be  established.  Until  that  time  arrives  very 
likely  the  change  may  occur  from  year  to  year.  These 
changes  may  introduce  a  large  element  of  error  unless 
their  influence  is  fully  recognized. 

There  is  another  general  principle  which  must  be  kept 
in  mind  in  analyzing  business  data.  It  is  this :  That 
"  the  total  can  be  no  more  accurate  than  its  most  faulty 
item,"  just  as  a  chain  is  not  stronger  than  its  weakest 
link.  This  principle  should  call  attention  to  the  fact 
that  the  value  of  all  materials  depends  first  of  all  upon  the 
reliability  of  the  details.  The  character  of  the  data  will, 
of  course,  be  judged  by  many  things.  There  is  the  source 
from  which  it  was  derived;  there  are  the  means  by  which 
it  was  collected ;  there  are  the  individuals  who  did  the  col- 
lecting ;  there  is  the  general  form  in  which  it  appeared. 
All  of  these  things  should  be  in  mind  when  considering  the 
value  of  business  data.  Obviously  material  from  second- 
ary sources  has  had  a  chance  of  accumulating  error  which 
material  from  first-hand  sources  has  not.  It  therefore 
becomes  desirable,  where  the  material  is  of  prime  impor- 
tance, to  reach  as  far  back  toward  the  original  source  as 
possible. 

This  discussion  of  methods  which  may  be  used  in  the 
analysis  of  business  material  has  employed  very  many 
terms  from  the  science  of  statistics.  But,  after  all,  it 
would  appear  that  the  analysis  of  business  material  is 
nothing  more  than  the  careful  and  thoughtful  application 


236  COMMERCIAL  RESEARCH 

of  common-sense  methods.  In  other  words,  the  methods 
of  business  analysis  are  the  use  of  good  judgment  based 
on  wide  knowledge  and  sound  experience.  These  general 
principles  may  be  stated  in  unfamiliar  terms,  but  when 
put  into  actual  practice  they  prove  to  be  the  same  meth- 
ods which  judgment  and  experience  always  evolve.  A 
careful  study  of  them,  however,  should  lead  to  greater 
accuracy  and  security  in  dealing  with  the  complex  prob- 
lems of  business  life.  There  arc  so  many  influences  at 
work  and  there  are  so  many  possibilities  of  error  and  the 
issues  at  stake  are  so  important  that  the  highest  degree 
of  accuracy  possible  should  be  aimed  at.  In  all  of  this 
the  fact  must  not  be  forgotten  that  business  statistics 
generally  deal  with  typical  or  average  conditions.  Under 
the  law  of  averages  the  items  to  be  judged  are  chosen  at 
random  and  are  almost  sure  on  the  average  to  be  typical. 
The  individual  item,  however,  which  in  any  given  case 
may  be  the  most  important  one,  is  not  necessarily  repre- 
sentative or  tj'pical.  The  whole  problem  of  analysis, 
therefore,  resolves  itself  finally  into  discovering  the  essen- 
tial items  in  the  individual  case. 


CHAPTER  VIII 

PRESENTATION    OF    BUSINESS    FACTS 

Purpose  —  The  report  —  Useful  devices  —  Geometric  figures  —  Pic- 
tures —  Models  —  Organization  chart  —  Tables  —  Rules  and  cautions. 

The  ultimate  aim  of  commercial  research  is  a  course 
of  action,  a  business  policy.  A  business  man  seeks  a  fuller 
knowledge  in  order  that  he  may  act  more  intelligently. 
He  feels  the  need  of  a  clearer  foresight,  a  keener  insight, 
and  a  broader  vision  of  business  affairs.  His  judgment 
will  become  more  reliable  as  his  knowledge  increases.  It 
is  not  enough,  therefore,  to  collect  or  even  to  analyze 
business  facts.  There  is  a  further  need  for  a  presenta- 
tion and  for  an  interpretation.  Practically,  it  is  not 
possible  to  separate  these  two  processes,  but  for  purposes 
of  clear  discussion  they  will  be  treated  as  distinct.  The 
present  discussion  will  deal  with  certain  general  principles 
relating  to  the  clear  and  accurate  presentation  of  business 
data.  What  the  making  of  blue  prints  is  to  the  architect 
or  contractor,  the  presentation  of  business  data  is  to  the 
one  engaged  in  commercial  research.  The  methods  of 
presentation  are,  in  fact,  the  blue  prints  of  business.  But 
business  data,  however  presented,  will  not  of  themselves 
solve  the  problems  of  tlie  manager.  They  can  aid  im- 
mensely b}^  disclosing  and  locating  them. 

Purposes.  In  the  process  of  giving  expression  to  the 
business  facts  that  have  been  accumulated,  there  are  two 
main  purposes  in  view.     The  business  man  may,  first,  want 

to  know  these  facts  for  himself.     This  means  that  he  de- 

237 


238  COMMERCIAL  RESEARCH 

sires  to  know  more  intimately  his  own  affairs.  In  this 
case  his  analysis  of  business  always  keeps  in  mind  the 
relation  of  these  facts  to  himself,  to  his  own  policy  and 
his  own  judgment.  He  may  want  to  discover  the  wastes 
or  leaks  in  his  business  and  to  stop  them.  He  may  want  to 
cut  down  costs  by  means  of  a  more  direct  process.  He 
ma}^  desire  to  eliminate  extra  handling  and  extra  charges. 
In  any  case,  when  the  purpose  of  the  analysis  is  to  examine 
one's  own  affairs  in  order  to  attain  a  higher  degree  of  effi- 
ciency, certain  principles  of  presentation  will  need  to  be 
applied.  In  a  case  like  this,  the  characteristics  to  be  em- 
phasized are  exactness,  thoroughness,  reliability.  There 
is  need  of  clear  reasoning,  of  careful  logic,  of  accuracy 
in  every  detail. 

The  second  general  purpose  of  presentation  of  business 
facts  may  be  to  influence  some  one  else.  This  means  that 
the  data  which  have  been  collected  will  be  used  for  the 
purpose  of  persuading  or  convincing  some  one  to  a  definite 
course  of  action.  Of  course,  there  is  just  as  great  need  in 
this  case  for  the  material  to  be  true  as  in  the  other.  The 
principles,  however,  which  will  guide  in  the  selection  of 
methods  of  presentation  may  differ  materially.  In  the 
former  case  the  interest  of  the  one  who  examines  the  facts 
may  be  assumed,  A  man  is  presumed  to  be  interested  in 
his  own  affairs.  When  these  facts  are  to  be  presented  to 
some  one  on  the  outside,  no  such  assumption  can  be  made. 
There  is,  then,  need  to  present  the  facts  in  such  a  way  as  to 
arouse  interest,  secure  attention,  and  make  an  appeal. 
While  here  the  facts  should  be  presented  with  clearness 
and  accuracy,  the  emphasis  will  rest  upon  the  elements  of 
persuasion  and  of  argument,  as  well  as  of  appeal.  It  is 
worth  while  to  keep  this  general  distinction  carefully  in 
mind. 


PRESENTATION  OF  BUSINESS  FACTS      239 

There  will  be  no  attempt  here  to  cover  all  possible 
methods  of  presentation.  The  subject  is  entirely  too 
broad  for  such  extended  treatment.  As  a  matter  of  fact, 
there  is  a  field  here  for  all  the  skill,  all  the  ingenuity  and 
the  cleverness  of  which  one  is  capable.  The  methods  of 
presentation  may  be  as  varied  as  business  itself.  Aside 
from  the  broad  distinction  made  above  —  that  is,  that  the 
methods  will  be  conditioned  by  the  purpose  in  view  —  there 
is  no  limit  to  the  possible  methods  except  one's  individual 
capacity.  This  is  especially  true  when  methods  of  presen- 
tation are  used  for  purposes  of  advertising  and  selling. 
In  this  field  the  problem  is  no  longer  one  of  commercial 
research;  it  is  an  art  in  itself. 

"  Ordinarily  facts  do  not  speak  for  themselves.  When 
the}'  do  speak  for  themselves  the  wrong  conclusions  are 
often  drawn  from  them.  Unless  the  facts  are  presented 
in  a  clear  and  interesting  manner,  they  are  about  as  effec- 
tive as  the  phonograph  record  with  the  phonograph  miss- 
ing." (Brinton,  "  Graphic  Methods  of  Presenting  Facts," 
p.  2.)  There  is  a  wise  principle  stated  here  in  a  clever 
manner  which  needs  very  careful  consideration.  The 
methods  of  presenting  data  are  really  the  means  of  putting 
life  and  significance  into  the  more  or  less  barren  facts  that 
have  been  collected.  Tliere  was  once  described  a  valley 
filled  with  dry  bones  which  by  a  magic  touch  sprang  into 
life  in  the  form  of  men.  The  process  of  presenting  facts  is 
the  process  of  giving  such  a  magic  touch  to  the  otherwise 
lifeless  figures. 

Most  men  who  have  not  given  much  thought  to  the  study 
of  presenting  business  data  have  felt  that  it  was  an  exceed- 
ingly difficult  subject.  There  has  appeared  to  them  an 
element  of  obscurity,  a  quality  of  technique  which  they  are 
not  capable  of  understanding  or  acquiring.     As  a  matter 


240  COMMERCIAL  RESEARCH 

of  fact  this  is  not  the  case.  The  general  principles  under- 
lying methods  of  presentation  are  simple.  There  is  no 
need  of  a  knowledge  of  "  higher  mathematics,"  or  of  calcu- 
lus, or  of  special  artistic  ability  in  order  to  present  busi- 
ness data  clearly  and  effectively.  Once  more  it  is  a  case 
of  being  able  to  apply  common-sense  methods  to  a  complex 
situation.  A  little  experimenting  on  the  part  of  many 
business  men  would  show  an  unsuspected  ability  to  resolve 
business  data  into  graphs  and  charts.  As  has  been  said, 
there  is  a  field  here  for  a  special  kind  of  art.  Just  as  some 
kinds  of  statistical  average  cannot  be  determined  without  a 
working  knowledge  of  higher  mathematical  formulas,  so 
here  are  problems  which  cannot  be  solved  except  by  those 
who  have  had  long  training  in  technique.  Nevertheless, 
there  is  much  that  can  be  done  by  any  one  who  will  give  at- 
tention to  the  elementary  principles  underlying  the  various 
methods  of  presenting  facts. 

The  Report.  There  are  many  forms  which  the  presen- 
tation of  business  facts  may  take.  It  is  not  the  purpose 
in  this  discussion  to  take  up  each  kind  in  detail  but  rather 
to  discuss  the  general  principles  which  may  be  applied  to 
the  whole  subject.  In  doing  this,  however,  it  will  be  neces- 
sary to  classify  the  various  types  of  methods  which  may 
be  employed. 

The  entire  work  may  be  called  by  the  most  general  term, 
"  the  report."  When  facts  have  been  accumulated  and 
analyzed  it  becomes  necessary  to  bring  them  all  together 
in  some  kind  of  relationship  which  may  often  appear  in  the 
form  of  a  general  report.  This  report  may  be  any  one  of 
several  different  kinds.  A  business  manager  may  desire  to 
report  the  conditions  of  business  to  the  president  of  his 
concern.  This  will  mean  a  certain  point  of  view  and  a  cer- 
tain emphasis  in  the  reporting  of  facts.     The  president 


PRESENTATION  OF  BUSINESS  FACTS      241 

may  also  desire  to  make  a  special  or  an  annual  report  to 
his  board  of  directors.  The  interest  in  this  particular 
case  will  be  centered  in  the  progress  of  the  business  for  the 
period  of  time  covered  by  the  report.  Generally,  the  di- 
rectors cannot  carry  the  details  of  business  in  mind  and 
look  only  for  the  final  results.  If  these  prove  to  be  satis- 
factory, there  is  likely  to  be  no  further  attention  given  to 
the  matter.  If,  however,  they  are  not  satisfactory,  some 
further  inquiry  may  be  begun  at  once.  Another  kind  of 
report  is  that  which  an  expert  investigator  makes  to  those 
who  have  employed  his  services.  He  comes  to  the  task 
from  the  outside  and  aims  to  collect  facts  which  will  pre- 
sent the  essential  details  of  the  business  in  a  clear  and  con- 
vincing manner.  The  form  which  this  report  takes  will 
probably  differ  in  some  material  respects  from  the  two 
just  mentioned.  It  may  be  necessary  for  the  general  in- 
vestigator to  make  a  report  summarizing  the  data  which 
he  has  been  able  to  obtain.  Here,  the  purpose  in  mind 
will  be  to  present  facts  without  an  attempt  at  drawing  con- 
clusions. In  some  cases  there  may  be  regular  blank  forms 
to  be  filled  out  by  entering  certain  specific  figures  in  the 
spaces  indicated.  A  formal  report  of  this  kind  requires 
no  more  than  accuracy  in  quoting  data  and  adapting  facts 
to  the  demands  of  the  blank  that  has  been  sent.  From 
another  point  of  view,  there  are  two  classes  of  reports. 
There  are  special  reports,  whose  purpose  is  definitely  lim- 
ited and  may  often  be  due  to  some  emergency  in  business. 
There  is  also  the  regular  report  which  may  come  at  the 
end  of  three,  six,  or  twelve  months.  Such  reports  as  this 
may  have  for  their  purpose  a  complete  record  of  business 
for  the  given  period  to  be  assembled  in  a  single  depart- 
ment for  further  use. 

A  general  report  of  the  character  discussed  here  is  made 


242  COMMERCIAL  RESEARCH 

up  of  two  parts.  One  part  consists  of  descriptive  matter, 
which  may  also  contain  the  conclusions  or  recommenda- 
tions that  are  drawn  from  the  investigation ;  the  other 
part  of  the  report  has  to  do  with  methods  of  presenting 
specific  data.  These  methods  deserve  special  treatment 
and  will  be  taken  up  later.  It  is  the  first  part  of  the 
report  which  demands  discussion  at  this  point. 

The  descriptive  portion  of  any  report  aims  to  present 
the  data  by  means  of  words.  It  is  to  be  judged,  therefore, 
by  principles  of  writing  rather  than  by  principles  of  sta- 
tistics or  accounting.  In  judging  a  piece  of  writing  there 
are  several  elementary  principles  to  keep  in  mind.  One 
is  to  know  specifically  and  definitely  the  purpose  in  view. 
One  cannot  write  with  full  intelligence  unless  he  under- 
stands the  purpose  which  his  writing  is  to  serve.  It  is 
this  purpose  that  will  guide  in  emphasis,  in  method  of 
treatment,  and  largely  in  analysis. 

Another  elementary  precept,  which  may  act  as  a  guide 
in  effective  presentation  of  material,  is  that  the  reader 
should  know  his  subject.  This  is,  of  course,  an  obvious 
principle.  No  one  can  write  with  effectiveness  unless  he 
is  thoroughly  acquainted  with  the  subject  matter  with 
which  he  is  to  deal.  No  investigation  of  business  can  be 
thoroughly  done  until  the  investigator  has  become  inti- 
mately acquainted  with  the  subject  which  he  is  analyzing. 
There  may  not,  therefore,  be  need  for  any  special  empha- 
sis upon  this  simple  principle.  The  fact  to  be  kept  in 
view  is  that  no  report  should  be  undertaken  until  the  entire 
subject  to  be  discussed  has  so  formulated  itself  in  the 
mind  that  the  writer  may  feel  complete  confidence  in  what 
he  says.  It  is  this  attitude  of  mind  which  carries  convic- 
tion and  which  insures  clearness  in  a  report.  It  is  an 
equipment  of  this  sort  that  fills  a  report  with  illuminating 


PRESENTATION  OF  BUSINESS  FACTS      243 

examples  and  clarifying  illustrations.  Under  these  con- 
ditions every  general  statement  will  appear  backed  up  by 
numerous  facts  which  will  enable  the  reader  quickly  and 
easily  to  check  up  the  conclusions  drawn. 

Another  principle  to  be  applied  in  the  making  of  a  de- 
scriptive report  is  that  the  writer  should  know  the  one 
who  is  to  read  the  report  when  made.  The  need  for  such 
a  principle  is  obvious.  If  the  writer  can  visualize  as  he 
writes  the  man  who  will  read  his  report,  he  will  be  able  to 
adjust  the  manner  of  treatment  and  the  material  more 
effectively.  One  does  not  do  his  best  writing  for  a  gen- 
eral or  unknown  reader.  A  successful  merchant  has  often 
told  his  experience  in  appealing  to  his  customers  by  vis- 
ualizing certain  groups  of  individuals.  For  example,  he 
once  had  a  number  of  remnants  for  sale.  He  decided  to 
put  these  on  a  bargain  counter  and  appeal  to  a  special 
group  of  individuals  in  his  market  who  would  be  interested 
in  this  sale.  This  group  of  individuals  was  represented  in 
his  mind  by  the  name,  "  Aunt  Sally,"  whom  he  character- 
ized as  a  middle-aged  spinster  lady  with  prim  ways  and  neat 
dress  and  careful  buying  habits.  He  thought  it  was  this 
type  of  individual  who  would  be  interested  in  the  sale  he 
was  putting  on.  As  he  wrote  the  copy  for  advertising  this 
sale,  he  had  this  type  of  individual  in  mind.  As  a  result 
there  appeared  on  the  following  day  individuals  who  ful- 
filled almost  exactly  the  description  which  had  been  given. 
At  the  close  of  that  day  every  remnant  had  been  sold. 
This  merchant  attributed  a  large  part  of  his  success  in 
merchandising  to  this  method  of  visualizing  the  individuals 
for  whom  he  wrote.  There  is  in  this  experience  the  gen- 
eral principle  which  has  been  stated  above.  He  knew  the 
reader  of  his  cop}'.  The  writer  of  a  report  should  like- 
wise be  able  to  visualize  the  reader  of  his  report. 


244  COMMERCIAL  RESEARCH 

A  further  principle  to  be  kept  in  mind  is  that  the  writer 
of  a  report  should  have  a  sufficiently  broad  and  flexible 
vocabulary  to  express  his  meaning  with  clearness  and 
force.  Many  investigations  into  business  subjects  lead 
into  a  discussion  of  technical  details.  Every  business  has 
its  own  language.  To  write  intelligently  and  effectively 
about  a  business  one  should  know  the  language  of  that 
business.  Sometimes  words  in  general  use  are  given  a 
special  meaning  in  certain  lines  of  business.  The  writer 
must,  of  course,  be  fully  aware  of  all  such  special  mean- 
ings. No  one  would  attempt  to  write  on  a  subject  in 
chemistry  without  first  becoming  familiar  with  chemical 
terminology.  The  same  thing  holds  true  of  many  lines  of 
engineering  work.  Brokers  on  the  grain  exchange  have  a 
language  all  their  own.  The  language  of  the  trade  is  in 
many  cases  the  most  forceful  language  which  can  be  used. 
The  writer  of  a  report  must  feel  at  home  in  this  language. 

Most  reports  on  business  subjects  cannot  be  said  to 
have  an  element  of  style  because  so  little  attention  is  given 
to  the  manner  of  expression.  Nevertheless,  such  reports 
should  be  characterized  by  two  qualities  which  are  gener- 
ally indispensable.  These  qualities  are  clearness  and  ef- 
fectiveness. The  reader  of  a  report  is  a  very  busy  man. 
He  has  no  time  to  figure  out  obscure  meanings  or  to  read 
many  pages.  The  descriptive  material,  therefore,  should 
be  highly  condensed  at  the  same  time  that  it  is  made  crystal 
clear.  The  writer  should  give  consideration  to  these  two 
elements  of  expression.  There  should  never  be  obscure 
passages  in  a  report  and  no  report  should  ever  be  padded 
with  useless  words.  Much  time  and  misunderstanding 
might  be  avoided  by  greater  care  in  this  regard. 

Another  characteristic  of  a  written  report  should  be 


PRESENTATION  OF  BUSINESS  FACTS      245 

that  all  general  statements  are  carefully  defended  by  an 
array  of  facts.  As  an  example  of  an  effective  way  to 
present  a  general  statement,  and  to  back  it  up  by  con- 
vincing facts,  the  following  two  paragraphs  are  quoted 
from  a  report  made  by  the  president  of  a  large  corpora- 
tion: 

"  The  Bell  system's  charge  for  service  is  not  exorbitant. 
The  average  revenue  per  station  to  the  Bell  system  has  been 
reduced  55  per  cent,  in  the  last  twenty  years,  and  is  less  than 
the  average  charge  of  any  other  exchange  system  that  gives 
continuous  and  immediate  service  anywhere  in  the  world  and 
less  than  that  of  most  of  those  that  give  any  service.  Seventy- 
five  per  cent,  of  the  subscribers  to  the  Bell  system  get  their 
service  for  less  than  the  average  charge.  The  service  of  the 
Bell  system  is  within  reach  of  the  small  user;  the  large  user 
pays  for  his  service  according  to  his  use. 

"  The  Bell  system  cost  of  construction  is  not  extravagant. 
The  average  cost  per  station  is  less  than  that  of  other  systems 
of  a  similar  nature  in  this  country  or  elsewhere.  The  cost  per 
station,  including  all  toll  lines  but  not  long-distance  lines,  is 
$135.  The  average  annual  gross  revenue  per  exchange  sta- 
tion, including  all  toll  service,  is  $39.62;  the  operating  ex- 
penses, including  taxes  and  depreciation,  are  $30.75 ;  leaving 
the  net  revenue  $8.87  on  an  investment  of  $135.  Out  of  each 
dollar  of  revenue  48.3  cents  are  paid  to  labor;  20.3  cents  for 
expenses  and  supplies;  5.6  cents  for  taxes;  19.8  for  dividend 
and  interest;  leaving  for  surplus  against  the  future  6.0  cents." 

Every  one  engaged  in  commercial  research  whose  duty  it 
is  to  write  a  descriptive  report  should  never  fail  to  give 
careful  references  to  the  sources  of  his  material.  If  the 
business  man  would  learn  a  lesson  from  the  lawyer,  who 
is  constantly  inquiring  the  authority  for  every  statement, 
he  would  be  far  more  cautious  about  accepting  unreliable 
information.     Furthermore,  if  it  ever  becomes  necessary 


246  COMMERCIAL  RESEARCH 

to  check  up  the  assertions  made  in  a  report,  the  references 
to  sources  will  make  this  possible  with  least  effort  and  least 
waste  of  time. 

The  written  report  gains  in  effectiveness  by  being  care- 
fully organized.  It  is  useful  to  form  the  habit  of  making 
a  careful  outline  of  the  points  to  be  discussed  before  a  re- 
port is  written  up.  Such  a  method  of  analysis  will  avoid 
repetition  and  is  likely  to  insure  a  logical  discussion. 
Above  all,  the  making  of  an  outline  will  compel  the  writer 
to  see  his  subject  through  to  the  end  before  he  begins  the 
discussion.  Some  critic  of  Patrick  Henry,  one  of  Amer- 
ica's most  famous  after-dinner  speakers,  said  of  him  that  he 
started  in  on  a  sentence  and  trusted  the  Lord  to  help  him 
out.  From  the  results  it  would  seem  that  sometimes  the 
Lord  failed  him.  No  writer  of  a  report  can  afford  to  be 
so  careless  in  the  construction  of  his  sentences  or  his  para- 
graphs. 

It  would  be  a  very  great  help  in  the  construction  of  a 
written  report  if  headings  were  used  to  guide  the  reader 
from  point  to  point.  These  headings  will  serve  the  same 
purpose  as  guideposts  along  an  unknown  way.  They  pre- 
pare the  reader  for  what  is  to  come  and  enable  him  to 
judge  that  material  more  intelligently.  These  headings 
also  have  a  reaction  upon  the  writer  and  tend  to  hold  him 
to  a  unified  discussion  of  the  point  at  issue. 

In  general,  it  may  be  said  that  a  written  report  should 
be  careful  and  comprehensive.  It  is  of  no  avail  to  use 
great  care  in  the  selection  and  analysis  of  data  unless  the 
same  element  is  carried  over  into  the  description  of  that 
material.  There  is  no  place  here  for  loose  or  evasive  ex- 
pressions. Every  word  should  count.  It  is  also  neces- 
sary to  see  that  the  report  covers  all  the  points  under  dis- 
cussion.    A  report  of  the  kind  discussed  here  is,  after  all. 


PRESENTATION  OF  BUSINESS  FACTS      247 

intended  to  be  an  aid  in  establishing  a  business  policy  and 
in  forming  a  judgment.  In  order  that  the  policy  may  be 
sound  and  the  judgment  wise,  it  is  necessary  to  know  all 
the  pertinent  facts.  It  is,  therefore,  essential  that  a  writ- 
ten report  should  be  comprehensive  in  character. 

As  an  example  of  the  method  which  is  recommended  in 
the  making  of  a  descriptive  report  the  following  section 
is  quoted.  It  will  be  noticed  that  this  section  has  a  special 
title  and  that  it  is  numbered  in  a  regular  sequence.  The 
material  for  it  has  evidently  been  drawn  from  individual 
plant  reports.  There  is  evidence  here  that  all  of  the 
material  has  been  very  carefully  considered  and  that  the 
generalizations  may  be  easily  checked  up  intelligently  from 
these  individual  reports.  There  is  evidence  here  also  of 
carefulness  and  comprehensiveness  in  the  treatment  of 
material: 

"  VIJ.     Foremanship. 

"  In  all  plants  the  foremen  have  been  selected  on  the  basis  of 
experience.  The  j^reater  part  of  them  have  come  up  from  the 
ranks.  At  new  plants  it  has  been  necessary  to  draw  foremen 
in  from  the  outside,  but  in  these  cases  tliey  have  come  from 
other  plants.  To  help  tlie  foremen  to  meet  their  problems  it  is 
the  custom  in  many  plants  to  hold  weekly  meetings.  Good 
examples  of  this  system  may  be  found  at  Ecorse,  Duluth, 
Toledo,  and  Ashtabula. 

"  There  are  no  well-defined  methods  of  discipline  in  these 
yards.  Cleveland  has  emj^loyed  the  threat  of  discharge  and  in 
case  of  temperamental  difficulty  between  foremen  and  men, 
shifts  from  one  gang  to  another.  The  Superior  plant  has 
given  to  its  foremen  tlie  right  to  liire  and  fire.  Tlie  IVfac- 
Dougall-Dulutli  Company  uses  the  forfeiture  of  the  bonus  for 
misbeliavior. 

"  To  increase  the  good  will  among  the  workmen  many  plants 
hold  regular  meetings  where  talks  are  given  by  various  mem- 
bers of  the  staff.     Welfare  work  also  is  being  done  in  many 


248  COMMERCIAL  RESEARCH 

yards.  The  American  Shipbuilding  Company  has  recently 
established  such  a  department.  Ecorse  has  a  very  active  de- 
partment of  this  kind.  Notable  work  is  being  done  at  the 
MacDougall-Duluth  Company  plant.  A  recreation  hall  has 
been  built,  safety  first  is  being  preached,  schools  are  planned, 
and  moving  pictures  are  to  be  used. 

"  In  general,  there  appeared  to  be  a  competent  set  of  fore- 
men in  charge  of  these  plants.  Many  of  them  seemed  to  ap- 
preciate the  great  need  of  producing  ships  quickly.  The  rela- 
tionship between  them  and  their  men  was  evidently  on  a  good 
and  friendly  basis." 

Useful  Devices.  In  addition  to  words  as  a  vehicle  for 
carrying  information  on  business  topics,  there  are  numer- 
ous other  aids  which  have  proven  their  worth.  More  in- 
genuity and  cleverness  has  been  shown  in  the  use  of  de- 
vices by  advertising  men  than  by  any  other  single  group. 
As  a  usual  tiling,  the  purpose  in  view  has  been  to  arouse 
interest  and  to  secure  action  in  accordance  with  the  desires 
of  those  who  have  goods  to  sell.  Many  excellent  means 
have  been  used  by  scientists  in  various  lines  of  investiga- 
tions. Those  interested  in  physical  research,  or  chemical 
research,  or  biological  studies,  have  made  use  of  many 
kinds  of  devices  in  order  to  show  abstract  relationships. 
Those  who  are  interested  in  engineering  subjects  have  also 
been  trained  in  the  use  of  formulas  to  represent  general 
conditions.  Up  to  this  time  the  general  business  man  has 
felt  that  he  does  not  have  the  training  or  capacity  to  mako 
use  of  these  means.  The  purpose  here  is  to  suggest  vari- 
ous devices  which  may  be  used  without  any  considerable 
amount  of  previous  training  or  experience.  Any  list 
can  have  no  claim  to  being  exhaustive  because  tlic  only 
limit  is  the  imagination  and  capacity  of  the  individual. 
It  may  be  that  each  problem  or  investigation  will  need  to 
discover  the  means  best  adapted  for  its  purposes.     The 


PRESENTATION  OF  BUSINESS  FACTS      249 

classification  of  the  means  that  have  been  used,  however, 
should  have  at  least  a  suggestive  value. 

Geometric  Figures.  The  science  of  geometry  has  been 
called  upon  very  largely  for  devices  that  may  be  used  in 
the  presentation  of  business  facts.  The  most  common 
figures  are  lines  and  curves.  Such  devices  are  generally 
known  as  graphs  or  charts.  They  consist  of  a  line  or  a 
curve  which  moves  in  accordance  with  variations  in  value 
or  quantity.  By  means  of  such  a  device  one  can  show  the 
relationship  between  two  variables.  In  order  to  construct 
charts  and  graphs  of  this  kind  there  is  need  of  a  back- 
ground which  has  been  laid  off  in  blocks  made  by  inter- 
secting lines.  There  are  many  kinds  of  chart  paper  that 
may  be  readily  secured  at  the  store.  On  paper  of  this 
sort  the  method  of  constructing  a  graph  is  extremely  sim- 
ple. One  line,  the  horizontal,  is  the  base  line,  and  gener- 
ally should  represent  a  series  of  equal  units.  Another  line 
rises  perpendicularly  from  it  and  is  also  divided  into  equal 
parts  or  segments,  each  of  which  is  to  have  a  designated 
value.  In  a  chart  of  this  kind  the  element  of  time  is  in  the 
majority  of  cases  one  of  the  variables  compared.  The 
general  rule  is  to  make  the  base  line  represent  units  of 
time.  The  vertical  line  will,  in  this  case,  represent  varia- 
tion in  quantity  or  value.  Usually  this  scale  should  begin 
at  zero.  All  that  remains  to  be  done  now  is  to  determine 
the  unit  of  time  and  of  quantity  or  value  to  be  repre- 
sented by  each  unit  of  space.  This  is  a  matter  merely  of 
judgment  and  inspection.  The  base  line  should  be  divided 
into  sections  that  will  correspond  to  the  desired  number 
of  units  of  time.  These  may  be  seconds,  minutes,  hours, 
days,  weeks,  months,  years,  etc.  In  determining  the  value 
of  each  division  of  the  vertical  line  it  is  wise  to  base  the 
judgment  upon  the  greatest  quantity  or  highest  value  to 


250 


COMMERCIAL  RESEARCH 


be  considered.      This  will  prevent   the  line  from  running 
above  the  margin  of  the  paper. 

A  simple  illustration  of  the  use  of  this  kind  of  graph  is 
shown  in  the  accompanying  figure,  III.     This  figure  was 


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made  by  a  merchant  for  the  obvious  purpose  of  educating 
his  customers  in  the  problems  which  he  had  to  meet.  He  is 
a  seller  of  woolen  clothing,  and  the  extraordinary  rise  in 
price  of  the  raw  material,  wool,  made  necessary  a  corre- 


PRESENTATION  OF  BUSINESS  FACTS      251 

sponding  rise  in  the  price  of  clothing.  For  his  own  en- 
lightenment and  for  the  education  of  his  customers,  he  had 
constructed  a  number  of  lines  which  illustrated  the  increase 
in  price.  It  is  to  be  noted  that  the  horizontal  line  repre- 
sents periods  of  time,  both  days  and  months.  The  vertical 
line  is  divided  into  units  of  monetary  value.  Such  a 
graph,  which  is  easy  to  construct  if  the  facts  are  at  hand, 
is  both  a  striking  and  a  clear  method  of  showing  the  varia- 
tions in  the  price  of  material  through  a  given  period  of 
time.  In  order  to  construct  such  a  chart,  it  was  first 
necessary  to  know  the  price  of  wool  in  April,  1917,  in 
order  to  prevent  the  line  from  running  above  the  top 
of  the  graph.  To  keep  such  a  figure  from  looking  lop- 
sided or  unsightly,  the  aim  should  be  to  make  the  values 
of  the  various  sections  such  as  to  bring  the  lines  well 
across  the  paper,  and,  if  possible,  at  such  a  height  from 
the  base  that  their  movement  may  be  easily  followed. 
There  are  some  further  points  which  should  be  noted  in  the 
construction  of  such  a  graph,  but  these  will  be  referred  to 
in  a  later  section. 

Another  geometric  figure  which  is  frequently  used  is 
the  rectangle  or  square.  If  the  desire  is  to  show  the  com- 
ponent parts  of  any  complex  data  and  at  the  same  time  to 
show  the  relationship  of  these  various  parts,  excellent  use 
may  be  made  of  this  figure.  The  kind  of  material  which 
readily  falls  into  such  a  group  is  the  cost  of  production, 
where  the  various  elements  of  cost  are  to  be  isolated  and 
their  varying  amounts  to  be  given.  An  illustration  of  the 
use  of  this  kind  of  device  appears  in  Figure  IV.  It  will 
be  noted  in  this  figure  that  there  are  rectangles  of  different 
sizes  joined  one  on  to  the  other,  and  identified  by  diflTerent 
marks,  each  one  representing  an  element  in  the  cost. 
There  are  figures  accompanying  the  chart  which  express 


252 


COMMERCIAL  RESEARCH 


Actual  Total  Expense:  of  Milk 
di5ti115ution  per.  quaut 


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Del  I  very  ■■    Processing    ^^      Overheod    CD 
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PRESENTATION  OF  BUSINESS  FACTS      J^53 

in  another  form  the  same  relationship  and  at  the  same 
time  furnish  the  basis  upon  which  the  calculation  has  been 
made.     Many  uses  may  be  made  of  the  geometric  figure. 

The  circle  is  also  frequently  used  to  show  the  relation- 
ship of  various  data.  This  circle  is  usually  divided  into 
segments,  each  segment  representing  a  per  cent  of  the 
total.  The  construction  of  such  a  figure  is  a  simple  mat- 
ter, once  the  segments  have  been  correctly  divided.  An 
illustration  of  the  use  of  this  type  of  device  is  given  in 
Figure  V.  It  may  be  said,  in  general,  that  the  circle  is 
most  useful  when  the  material  is  not  too  complex.  The 
illustration  given  may  be  criticized  because  of  the  difficulty 
there  is  in  estimating  the  value  of  the  small  sectors. 
Where  there  is  this  confusion  and  difficulty  the  device  be- 
comes less  effective.  The  circle,  however,  has  many  uses, 
and  its  chief  merit  is  its  familiarity. 

Many  other  figures  may  be  used,  such  as  parallel  bars, 
the  cylinder,  the  pyramid,  or  the  cone,  and  are  often  em- 
ployed effectively.  It  is  to  be  remembered  that  there  is 
no  limit,  other  than  the  skill  and  imagination  of  the  inves- 
tigator, to  the  kinds  of  figures  which  he  may  employ.  A 
bit  of  advice,  however,  is  necessary  and  a  word  of  caution, 
also,  to  the  effect  that  the  figure  which  is  to  be  used  should 
be  very  carefully  studied  before  it  is  employed.  Often  the 
character  of  the  material  will  not  adapt  itself  to  the  type 
of  figure  desired.  Frecjucntly,  also,  the  purpose  in  view 
will  not  best  be  shown  by  the  figure  in  mind.  In  general, 
for  quantitative  comparisons  parallel  bars  or  rectangles 
are  best  suited,  particularly  if  comparison  by  length  alone 
is  made.  Other  figures  usually  employ  a  comparison  of 
areas,  are  diflicult  to  construct  accurately,  and  are  likely  to 
convey  wrong  impressions  as  to  the  proportions  involved. 

Maps.     Very  extensive  use  is  made  of  maps  in  present- 


254 


COMMERCIAL  RESEARCH 


POWER   ON  AMERICAN   FARMS 


Total-     2G.OOO.OOO   H.P. 
Used  on  Farms  ■■■■■■■■■  26,000.000  H.e 

Used  in  Manufacturing  F^t^b'a^^  I  1  9,000.000  H.R 

TRACTOR  POTENTIAL  MARKET 


Tbfal-  I.OSO.OOOTractors 
Fig.  V 


PRESENTATION  OF  BUSINESS  FACTS      255 


FiQ.  VI 


256  COMMEKCIAL  RESEARCH 

ing  business  data.  This  device  is  very  familiar  to  those 
who  use  the  map-and-tack  system  in  directing  traveling 
salesmen  and  in  the  apportioning  of  their  territory. 
Wherever  the  market  is  of  wide  dimensions  and  of  varied 
character,  it  may  be  wise  to  divide  it  on  a  geographical 
basis.  In  this  case  a  map  may  be  the  most  useful  means 
of  making  this  market  comprehensive  at  a  glance.  The 
use  of  a  map  is  in  reality  obtaining  a  bird's-eye  view  of  a 
widely  extended  problem.  It  is  often  found  possible,  also, 
to  aid  in  visualizing  a  concentrated  problem  by  spreading 
it  out  upon  an  enlarged  map  area.  This  is  fairly  well 
shown  in  the  accompanying  illustration.  Figure  VI. 

Pictures.  Another  familiar  means  of  presenting  busi- 
ness material  is  through  pictures.  Figure  VII,  or  photo- 
graphs. Devices  of  this  character  are  not  of  great  assist- 
ance where  the  purpose  in  mind  is  merely  clearness  of 
presentation,  except  in  case  of  careful  photographs  made 
of  machines  or  processes.  Technical  reports  often  find  it 
necessary  to  use  this  means  in  order  to  make  the  details 
of  the  report  clear.  In  studies  of  this  kind  the  camera  and 
especially  moving  pictures  are  coming  into  wider  and  more 
practical  use  every  day.  Where  the  aim  is  to  appeal  to  a 
prospective  buyer  and  the  hope  is  to  gain  his  instant  atten- 
tion, photographs  and  pictures  are  often  used  which  are 
humorous  in  character  and  frequently  arc  merely  cartoons. 
In  cases  like  this  no  general  rules  can  be  given  because  the 
purpose  in  view  will  every  time  determine  the  character  of 
illustration  and  the  type  of  picture. 

Models.  The  inventor  has  long  since  introduced  the  use 
of  models  as  a  means  of  demonstration.  A  more  extended 
use  of  this  type  might  very  well  be  made.  Wliere  the  ma- 
terial is  new  and  unknown  and  is  of  a  technical  or  complex 
nature,   it   is,  of  course,   more  easily   understood   if  it   is 


PRESENTATION  OF  BUSINESS  FACTS      257 


VARIATIONS  IN  THE  CONTENTS  OF  MILK  DRAWN  FROM  THE  COW 

Compiled  from  data  od  several  hundred  tests  maie  bv  Hermann  C  Lythgoe,  Analyst  of  the 
Massachusetts  State  Department  of  Health. 


SCIENTIFICALLY 
CALLED 


Total  i 
Solids 


Water 


RiT. 


Solids 

NOT 
TAT 


ORDINARILY 
CALLED 


KNOW  WHAT  IS  IN  YOUR  MILK  AND  CREAM 

Grading  and  Labeling  tells  the  story — Demand  it 
Fig.  VII 


258  COMMERCIAL  RESEARCH 

shown  in  miniature  as  it  actually  is,  or  is  to  be,  on  a  large 
scale.  Lawyers  have  found  that  the  best  kind  of  evidence 
is  "  real  "  evidence,  which  means  the  bringing  in  to  court  of 
the  very  instruments  used  in  committing  the  deed,  or  the 
defective  switch  wliich  caused  the  disastrous  wreck.  Busi- 
ness men  may  well  profit  by  the  experience  of  others  in  this 
regard. 

Organization  Chart.  Sometimes  various  devices  are 
combined  with  good  effect.  One  of  the  most  useful  means 
of  presenting  material  that  is  at  all  adaptable  to  this 
method  of  presentation  is  the  organization  chart.  It  is 
possible  through  this  device,  by  the  use  of  squares,  rec- 
tangles, or  circles^  connected  by  lines  to  concentrate  in  one 
simple  diagram  many  different  factors.  Investigators 
who  have  been  interested  in  the  study  of  scientific  manage- 
ment have  made  the  organization  chart  familiar  to  manu- 
facturers. A  very  useful  exercise  for  the  merchant  or 
manufacturer  is  the  construction  of  a  chart  that  will 
show  the  distributive  organization  of  his  own  commodity. 
It  may  be  that  he  has  never  taken  a  broad  view  of  the  dis- 
tributive system  which  he  is  using,  or  of  the  various  rela- 
tionsliips  of  risk  and  responsibility  of  the  middlemen  who 
stand  between  the  maker  and  user. 

Charts  of  this  kind  may  be  carried  into  details  as  far 
as  the  purpose  justifies.  An  illustration  is  given  in  Fig- 
ure VIII  of  an  organization  chart  which  shows  the  lines  of 
control  centering  in  the  advertising  manager.  Such  a 
chart  is  of  educational  value  not  only  to  the  manager 
liimscif  but  to  every  subordinate  throughout  the  establish- 
ment. The  humblest  worker  may  be  made  to  realize  by  a 
chart  of  this  kind  that  he  is  an  important  part  of  the 
whole  organization. 

The  business  manager  himself  may  get  a  new  view  of  the 


PRESENTATION  OF  BUSINESS  FACTS     259 

How  Sankist  Advertising  Is  Subdivided 


ADVERT13INC   MAMACCR 


Advertuino  -_  _  Assislont  Deole»>  House  PrtnUno    A 


le.ltno          I                          Accounts     I  I    Stal.onery       1 

'l'"8  I 1         R«corJ»     I j         SIOCK  I 


Fig.  VIII 
business  organization  of  which  he  is  a  part  by  constructing 
a  chart  of  the  distributive  organization  which  carries  his 
goods  from  producer  to  consumer.     A  simple  illustration 
of  such  a  chart  is  given  in  the  accompanying  figure,  IX. 

The 
Manufacturer 


Resident 
Mill  Agent 


Clearing 

House  ■*■ 

forJohher^ 


Consumers 


—L  evin 


77ze  U&appi'ng  Paper 
Distributiire  Organization 


Fig.  IX 


260  COMMERCIAL  RESEARCH 

It  is  possible  by  this  means  to  make  a  careful  study  of  the 
lines  of  control  and  of  risk  as  the  goods  pass  on  their  way 
toward  consumption.  One  m«ay  know  more  clearly  what 
his  own  relationships  are  with  the  various  middlemen  whom 
he  meets  and  with  his  competitors.  Some  such  chart 
should  be  before  the  business  manager  every  day,  in  order 
that  the  entire  organization  may  be  a  part  of  his  plans  and 
of  his  judgment. 

Tables.  One  of  the  most  familiar  methods  of  present- 
ing data  is  by  means  of  tables.  There  are  various  methods 
of  tabulation,  most  of  which  are  so  simple  that  one  needs 
no  previous  training  to  use  them.  There  are,  however, 
some  phases  which  should  be  carefully  considered.  A 
fundamental  principle  in  the  construction  of  a  table  is 
that  "  each  table  should  be  a  unit."  This  advice  means 
simply  that  there  should  be  unity  of  purpose  behind  the 
table  which  is  being  made.  It  is  not  enough,  however,  to 
have  mere  unity  of  purpose.  Even  though  this  is  secured, 
it  may  not  be  possible  for  all  the  material  to  be  presented 
in  a  single  table.  One  of  the  first  questions  to  ask  is.  Can 
the  facts  be  shown  in  one  table.'*  The  rule  which  should 
guide  in  answering  this  question  is  that  no  table  should  be 
so  large  or  so  complex  as  to  be  confusing.  If  a  table  is 
hard  to  follow,  it  loses  much  in  clearness  and  effectiveness. 
On  the  other  hand,  it  may  be  said  tliat  if  the  material  can 
be  put  in  a  single  table,  it  is  then  all  brought  together  so 
that  it  is  not  difficult  to  make  the  desired  comparisons.  It 
must  finally  be  left  to  the  individual  judgment  to  deter- 
mine whether  one  or  more  tables  should  be  used  to  carry 
the  material. 

A  table  may  show  either  figures  or  percentages  or  both. 
Here,  again,  the  nature  of  the  investigation  would  very 
largely    determine    what    the    character    of    the    material 


PRESENTATION  OF  BUSINESS  FACTS      261 

should  be.  It  is  wise  advice,  however,  to  say  that  if  per- 
centages appear  in  the  table,  the  figures  should  be  near  at 
hand  for  checking  them  up.  A  good  general  rule  is  that 
every  kind  of  chart  should  have  at  hand  the  means  of  cor- 
recting or  checking  any  part  of  it  or  the  final  results.  It 
is  clear  that  a  table  which  carries  both  the  figures  and  the 
percentages  will  be  able  to  show  much  more  than  a  table 
carrying  only  one  or  the  other. 

In  the  construction  of  a  table  there  are  several  points  to 
keep  in  mind.  One  of  the  first  questions  asked  is.  What 
form  shall  a  table  take.''  Again  the  answer  would  have  to 
be  indirect.  It  will  depend  very  largely  upon  the  kind  of 
material  and  the  purpose  in  view.  Obviously,  however,  if 
a  table  is  to  show  comparisons,  which  is  usually  the  case, 
the  facts  which  are  to  be  compared  should  be  brought  as 
close  together  as  possible.  If  the  data  are  in  columns 
then  the  columns  should  be  near  enough  to  each  other  so 
that  a  ready  comparison  can  be  made.  If  the  totals  or 
the  averages  or  the  percentages  are  the  important  thing, 
then  these  should  be  in  such  position  as  to  make  compari- 
son easy. 

It  is  clear  that  a  table  can  be  constructed  only  after  a 
large  part  of  the  analysis  has  been  made.  In  fact,  the 
making  of  a  table  is  a  part  of  the  analysis.  In  connec- 
tion with  this  analysis  there  arises  a  question  of  the  num- 
ber of  columns  to  be  used,  the  headings  to  be  given  to  each, 
and  the  title  which  the  table  itself  is  to  carry.  Common 
sense  will  dictate  in  most  cases  the  best  usage.  Some  sim- 
ple principles,  however,  may  be  stated  for  the  purpose  of 
guidance.  If  it  is  desired  to  carry  the  analysis  of  data 
into  minor  details,  then  the  number  of  columns  will  increase 
and  the  number  of  headings  likewise.  Of  course  the  more 
minute  the  details  of  analysis,  the  more  nearly  should  one 


262  COMMERCIAL  RESEARCH 

approach  absolute  accuracy.  The  word  of  warning  which 
should  be  given  is  that  confusion  must  be  avoided.  In  a 
case  of  this  kind  there  will  be  need  of  main  headings  and 
subheadings,  each  of  which  should  express  compactly  and 
clearly  the  principle  illustrated  by  the  facts.  In  general, 
the  title  of  the  table  and  the  headings  of  the  columns 
should  in  every  case  contain  the  unit  which  has  been  used 
in  analysis,  and  should  be  complete  and  self-explanatory. 
It  is  desirable,  also,  in  constructing  a  table  to  omit  as 
many  digits  as  possible  and  still  maintain  reasonable 
accuracy.  If  carried  too  far  the  figures  will  become  cum- 
bersome and  confusing. 

A  table  is  just  as  accurate  as  the  degree  to  which  the 
one  who  constructs  it  is  careful  and  accurate.  Whether 
the  table  is  to  be  presented  to  the  manager  of  the  business, 
or  whether  it  is  to  be  used  for  purposes  of  persuasion  and 
appeal,  a  high  standard  of  accuracy  must  be  maintained. 
This  standard  holds  not  only  for  the  title  and  the  headings 
but  also  for  the  mathematical  calculations.  While  small 
mistakes  might  make  no  real  difference  in  the  results,  their 
effects  are  extremely  bad.  A  single  error  in  a  table  may 
destroy  the  general  effect  of  the  whole  by  arousing  a  sus- 
picion. In  order  to  eliminate  as  far  as  possible  all  errors 
in  addition  or  multiplication  or  division,  it  may  be  neces- 
sary to  check  up  the  items.  In  these  days  of  calculating 
machines  they  should  be  used  freely  in  such  a  process.  An 
example  of  a  table  which  is  clear  and  effective  is  given  here. 
A  careful  study  of  this  table  will  well  repay  the  time  and 
effort  spent. 


PRESENTATION  OF  BUSINESS  FACTS      263 


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264  COMMERCIAL  RESEARCH 

Rules  and  Cautions.  It  is  possible  to  state  only  a  few 
general  rules  to  guide  in  the  use  of  charts  and  graphs  for 
the  purpose  of  presenting  business  data.  In  the  discus- 
sion which  has  just  preceded  the  various  types  of  devices 
have  been  described  and  the  method  of  their  construction 
has  been  explained.  It  now  remains  to  add  a  few  princi- 
ples as  to  their  use.  The  particular  aim  is  to  caution 
against  a  misrepresentation  of  facts  by  the  employment  of 
such  means. 

Charts  and  graphs  may  be  discussed  together  in  this 
connection.  In  general,  they  are  best  adapted  to  the 
following  uses : 

'  1.  To  show  component  parts.  This  means  that  the 
material  is  of  a  complex  character,  and  it  is  desired  to 
show  the  relationship  of  these  different  parts.  One  excel- 
lent way  to  accomplish  this  purpose  is  to  use  bars  of  vary- 
ing length  which  may  themselves  be  divided  into  sections, 
each  representing  a  definite  element  in  the  material.  As 
has  been  suggested  above,  costs  may  be  represented  clearly 
in  this  way.  The  various  elements  that  enter  into  the 
total  cost  can  be  indicated  and  their  relationship  also  re- 
vealed by  the  varying  lengths  of  the  bars.  It  is  likewise 
possible  to  show  component  parts  by  means  of  circles, 
which  are  divided  into  sectors,  each  sector  representing  one 
of  the  elements  in  the  complex  data.  Squares  and  rec- 
tangles may  also  be  used  for  a  similar  purpose.  These 
figures  may  be  subdivided  in  many  difl^erent  ways,  to  show 
many  different  kinds  of  facts. 

2.  To  show  comparisons.  The  cliief  aim  of  all  statis- 
tical work  is  to  show  comparative  values.  The  devices 
that  are  readily  adapted  to  this  use  are  parallel  bars,  vari- 
ous sizes  of  circles,  pictured  objects  drawn  on  different 
scales,  squares  and  rectangles,  also  of  varying  sizes,  etc. 


PRESENTATION  OF  BUSINESS  FACTS      265 

These  are  familiar  methods  of  showing  comparisons,  but 
may  often  be  misrepresentative  unless  care  is  used  in  the 
construction  of  the  charts  and  diagrams.  It  must  be  re- 
membered, for  instance,  that  if  the  areas  of  squares  and 
rectangles  are  to  represent  different  values,  the  difference 
in  value  should  correspond  to  the  difference  in  area.  The 
area  of  a  square  or  rectangle  is  equal  to  the  base  length 
multiplied  by  the  height.  It  may  be  noted  in  passing  that 
a  rectangle  can  be  used  to  express  three  different  quanti- 
ties ;  one  side  may  represent  price  and  another  side  may 
represent  quantity,  while  the  entire  area  represents  the 
value.  The  value  is,  of  course,  equal  to  the  quantity  mul- 
tiplied by  the  price.  The  same  caution  is  needed  in  the 
use  of  spheres,  circles,  and  cubes.  The  relative  sizes  of 
these  figures  are  not  the  same  as  the  relative  lengths  of 
straight  lines.  The  areas  of  circles  or  cubes  or  spheres, 
must  be  calculated  carefully  or  else  the  relationship  is  not 
accurate. 

Effective  use  has  frequently  been  made  of  pictured  ob- 
jects or  symbols  drawn  on  different  scales  to  represent 
varying  quantities  or  values.  These  offer  even  greater 
difficulties  of  accurate  construction  than  those  mentioned 
above.  They  arc  justified  only  on  the  basis  of  their  vivid- 
ness. A  considerable  degree  of  artistic  skill  is  also  gen- 
erally required  to  make  them  attractive.  An  example  of 
this  type  is  given.     Figure  X. 

3.  To  show  interdependent  relationship.  A  combina- 
tion of  several  geometric  figures  may  be  used  to  show  lines 
of  authority  or  elements  in  organization,  or  any  kind  of 
interrelated  elements.  A  familiar  use  of  devices  for  this 
purpose  is  shown  by  organization  charts  which  have  been 
discussed  in  detail  before.  The  value  of  this  method  for 
tracing  the  processing  of  material   through   a   plant   or 


266 


COMMERCIAL  RESEARCH 


vV»l'>fc: 


Jewelers 


Herald-Traveler  American      Globe  Post 

23,444  7,888         9,819  12^4 

A  superb  index  as  to  generous  buying  power,  for  the 
guidance  of  general  advertisers,  is  the  selection  of  news- 
papers by  local  merchants  selling  high-class  merchandise. 
Expensive  jewelry  is  a  good  example. 

During  1917  high-class  Boston  jewelers  used  Boston 
newspapers  as  below: 

Herald-Traveler  Post  Globe     American 

Bigelow  Kennard  Co ,  l,3l5  1,T60  834  550 

Hodgson,  Kennard  Co 1,039  

Frank  N.  Nathan 3,l67  1,965  708  596 

Carl  H.  Skinner 690  

A.  Stowell.: 4,029  2,307  2,148  2,l60 

Smith  Patterson  Co 13,204  7,282  6,129  4,582 

Totals   23,444      12,914       9,819       7,888 

Fio.  X 


PRESENTATION  OF  BUSINESS  FACTS      267 

store,  to  show  the  line  or  staff  organization  within  the 
business,  to  show  the  related  functions  in  any  business 
activity,  or  any  other  series  of  relationships,  is  readily 
seen. 

4.  To  reveal  the  relation  of  variables.  Business  activ- 
ity is  constantly  shifting  and  changing.  It  is  never  static  ; 
it  never  remains  the  same  from  period  to  period.  There  is 
frequent  need,  therefore,  of  some  means  to  trace  the  con- 
stantly shifting  relationships  that  exist  in  any  business 
process.  The  simplest  and  most  useful  means  to  gain  this 
end  is  the  use  of  curves.  In  variables  of  this  character 
it  is  generally  easy  to  find  that  one  is  an  independent  vari- 
able, and  the  other  is  a  dependent  variable.  For  example, 
the  element  of  time  may  frequently  be  found  to  be  the  inde- 
pendent variable,  while  the  amount  of  goods  sold  will  de- 
pend directly  upon  the  time.  In  order  to  show  this  rela- 
tionship the  best  method,  probably,  is  to  chart  it  in  the 
form  of  a  curve  where  the  base  line  represents  the  time  and 
the  vertical  line  represents  the  quantity  of  goods  sold.  It 
may  be  said  in  general  that  when  lines  or  curves  are  used 
the  rule  is  to  make  the  base  line  represent  the  independent 
variable  and  the  vertical  the  dependent  variable.  Other- 
wise it  is  not  possible  to  read  the  chart  readily  or  to  dis- 
cover relationship  at  any  given  period  of  time. 

A  caution  is  needed,  also,  in  the  construction  of  such 
curves  to  the  effect  that  careful  judgment  should  be  used 
in  selecting  the  units  both  on  the  base  line  and  on  the 
vertical  line.  It  is  easily  possible  to  overemphasize 
changes  by  selecting  a  unit  which  causes  violent  fluctua- 
tions in  the  curve  or  line  that  is  being  plotted.  For  ex- 
ample, if  the  time  units  on  the  base  line  are  given  too 
much  space  value,  the  result  will  be  to  flatten  out  the  line 
which  is  being  drawn  so  as  to  minimize  the  changes.     On 


268  COMMERCIAL  RESEARCH 

the  contrary,  if  the  space  value  is  too  small  or  if  the  units 
of  quantit}'  are  too  large,  the  changes  in  the  line  may  be 
too  great  to  represent  the  facts  accurately.  A  little  care 
in  this  matter  will  enable  one  to  adjust  the  units  of  time 
and  quantity  to  represent  fairly  the  material  that  is  being 
presented.  When  carefully  used,  the  chart  of  this  kind 
is  of  immense  value.  "  A  curve  permits  of  finer  interpre- 
tation than  any  other  known  method  of  presenting  figures 
for  analysis."  (Brinton,  "Graphic  Methods  of  Present- 
ing Facts,"  p.  73. ) 

The  use  of  figures  of  this  kind  should  be  connected  with 
the  previous  discussion  of  statistical  averages.  By  means 
of  a  curve  or  a  line  it  is  usually  easy  to  locate  the  mode. 
This,  it  will  be  remembered,  is  the  most  useful  statistical 
average  for  the  business  man.  The  highest  point  attained 
by  a  plotted  curve  will  identify  the  mode.  As  a  matter  of 
fact,  where  this  mode  is  not  readily  obtained  by  an  inspec- 
tion of  the  figures,  it  may  be  wise  to  put  the  material  in 
the  form  of  a  curve  in  order  tliat  the  mode  may  thus  be 
located.  If  it  is  desired  to  compare  the  modes  of  various 
groups  of  material,  this  may  be  readily  done  by  running 
the  curves  on  the  same  chart  and  thus  locating  the  mode 
for  each  group.  "  When  it  comes  to  considering  two  or 
three  columns  of  figures  simultaneously  to  see  whether 
there  is  similarity  in  the  fluctuations  shown  by  the  various 
sets  of  figures,  the  number  of  men  who  can  intelligently 
grasp  the  facts  presented  are  rather  few.  It  is  in  just 
such  problems  as  these,  where  a  number  of  sets  of  data 
must  be  compared,  that  curves  have  tremendous  advantage 
over  presentations  by  columns  of  figures."  (Brinton, 
"  Graphic  Methods,"  p.  107.) 

This  survey  of  methods  of  presenting  business  facts  has 
been  made  to  suggest  the  kinds  of  devices  which  may  be 


PRESENTATION  OF  BUSINESS  FACTS      269 

used  by  any  business  man.  The  discussion  has  not  aimed 
at  completeness  but  at  suggestiveness.  It  is  felt  that  a 
far  greater  use  might  be  made  of  easily  constructed  figures 
which  will  enable  the  business  manager  to  grasp  more 
clearly  and  more  readily  the  complex  elements  in  the  prob- 
lem before  him.  There  is  no  claim  that  devices  of  this  sort 
will  solve  business  problems.  Their  purpose,  rather,  is  to 
identify  the  problems.  As  a  general  rule,  when  a  difficulty 
has  been  fully  understood,  it  has  been  at  least  half  over- 
come. Herein  lies  the  value  of  well-used  methods  of  pres- 
entation. 

It  is  suggested,  also,  that  any  one  interested  in  graphic 
presentation  of  business  data  should  begin  a  study  of  the 
various  methods  that  are  used  by  others.  The  best  sources 
for  infomiation  of  this  kind  are  the  government  reports. 
These  are  almost  always  easily  accessible.  Tlie  Statisti- 
cal Atlas  of  the  U.  S.  Bureau  of  the  Census,  in  particular, 
will  prove  exceedingly  interesting  and  suggestive  in  the 
matter  of  devices  which  may  be  used  to  present  many  dif- 
ferent kinds  of  material  for  many  different  purposes. 
There  is  also  a  very  excellent  discussion  of  the  graphic 
method  to  be  found  in  Brinton's  "  Grapliic  Methods  for 
Presenting  Facts."  This  book  is  filled  with  illustrations 
and  shows  both  good  and  bad  examples  of  the  use  of  charts 
and  graphs.  It  will  prove  very  suggestive  to  any  one  en- 
gaged in  commercial  research.  The  following  rules  have 
been  selected  from  it.  They  will  aid  in  determining  the 
kind  of  graphs  to  use  and  in  criticizing  the  methods  of 
construction. 

"  CHECKING  LIST  FOR  GRAPHIC  PRESENTATIONS 

Are  the  data  of  the  chart  correct? 

Has  the  best  method  been  used  for  showing  the  data? 


270  COMMERCIAL  RESEARCH 

Are  the  proportions  of  the  chart  the  best  possible  to  show  the 

data  ? 
Are  all  scales  in  place? 
Have  the  scales  been  selected  and  placed  in  the  best  possible 

manner  ? 
Are  the  points  accurately  plotted? 
Are  the  numerical  figures  for  the  data  shown  as  a  portion  of 

the  chart? 
Have  the  figures  for  the  data  been  copied  correctly? 
Can  the  figures  for  the  data  be  added  and  the  total  shown? 
Are  all  dates  accurately  shown? 

Is  the  zero  of  the  vertical  scale  shown  on  the  chart? 
Are   all   zero   lines   and  the    100  per  cent,   lines  made  broad 

enough  ? 
Is  all  the  lettering  placed  on  the  chart  in  the  proper  directions 

for  reading? 
Is  a  key  or  legend  necessary? 

Does  tlie  key  or  legend  correspond  with  the  drawing? 
Is  there  a  complete  title,  clear  and  concise?  "      (Ref.  Brinton, 

"  Graphic  Methods,"  p.  360.) 

" RULES  FOR  GRAPHIC  PRESENTATION 

1.  Avoid  using  areas  or  volumes  when  representing  quantities. 
Presentations  read  from  only  one  dimension  are  the  least 
likely  to  be  misinterpreted. 

2.  The  general  arrangement  of  a  chart  should  proceed  from 
left  to  right. 

3.  Figures  for  the  horizontal  scale  should  always  be  placed  at 
the  bottom  of  a  chart.  If  needed,  a  scale  may  be  placed  at 
the  top  also. 

4.  Figures  for  the  vertical  scale  should  always  be  placed  at 
the  left  of  a  chart.  If  needed,  a  scale  may  be  placed  at 
the  right  also. 

5.  Whenever  possible,  include  in  the  chart  the  numerical 
data  from  which  the  chart  was  made. 

6.  If  numerical  data  cannot  be  included  in  the  chart,  it  is 
well  to  show  the  numerical  data  in  tabular  form  accom- 
panying the  chart. 

7.  All  lettering  and  all  figures  on  a  chart  should  be  placed  so 


PRESENTATION  OF  BUSINESS  FACTS      271 

as  to  be  read  from  the  base  or  from  the  right-hand  edge  of 

the  chart. 
8.  A  column  of  figures  relating  to  dates  should  be  arranged 

with  the  earliest  date  at  the  top. 
J).   Separate  columns  of  figures,  with  each  column  relating  to  a 

different  date,  should  be  arranged  to  show  the  column  for 

the  earliest  date  at  the  left. 

10.  When  charts  are  colored,  the  color  green  should  be  used 
to  indicate  features  which  are  desirable  or  which  are  com- 
mended, and  red  for  features  which  are  undesirable  or 
criticized  adversely. 

1 1 .  For  most  charts,  and  for  all  curves,  the  independent  vari- 
able should  be  shown  in  the  horizontal  direction. 

12.  As  a  general  rule,  the  horizontal  scale  for  curves  should 
read  from  left  to  right,  and  the  vertical  scale  from  bottom 
to  top. 

13.  For  curves  drawn  on  arithmetically  ruled  paper,  the  verti- 
cal scale,  whenever  possible,  should  be  so  selected  that  the 
zero  line  will  show  on  the  chart. 

14.  The  zero  line  of  the  vertical  scale  for  a  curve  should  be  a 
much  broader  line  than  the  average  coordinate  lines. 

15.  If  the  zero  line  of  the  vertical  scale  cannot  be  shown  at  the 
bottom  of  a  curved  chart,  the  bottom  line  should  be  a 
slightly  wavy  line,  indicating  that  the  field  has  been 
broken  off  and  does  not  reach  to  zero. 

16.  When  curves  are  drawn  on  logarithmically  ruled  paper,  the 
bottom  line  and  the  top  line  of  the  chart  should  each  be  at 
some  power  of  ten  on  the  vertical  scale. 

1 7.  When  the  scale  of  a  curved  chart  refers  to  percentages,  the 
line  at  100  per  cent,  should  be  a  broad  line  of  the  same 
width  as  a  zero  line. 

18.  If  the  horizontal  scale  for  a  curve  begins  at  zero,  the  verti- 
cal line  at  zero  (usually  the  left-hand  edge  of  the  field) 
should  be  a  broad  line. 

19.  When  the  horizontal  scale  expresses  time,  the  lines  at  the 
left-  and  right-hand  edges  of  a  curved  chart  should  not  be 
made  heavy,  since  a  chart  cannot  be  made  to  include  the 
beginning  or  the  end  of  time. 

20.  When  curves  are  to  be  printed,  do  not  show  any  more 
coordinate  lines  than  necessary  for  the  data  and  to  guide 


272  COMMERCIAL  RESEARCH 

the  eye.      Lines  one  quarter  of  an  inch  apart  are  sufficient 
guide  to  the  eye. 

21.  Make  curves  with  much  broader  lines  than  the  coordinate 
ruling  so  that  the  curves  may  be  clearly  distinguished  in 
the  background. 

22.  Whenever  possible  have  a  vertical  line  of  the  coordinate 
ruling  for  each  point  plotted  on  a  curve,  so  that  the  vertical 
lines  may  show  the  frequency  of  the  data  observations. 

23.  If  there  are  not  too  many  curves  drawn  in  one  field  it  is 
desirable  to  show  at  the  top  of  the  chart  the  figures  repre- 
senting the  value  of  each  point  plotted  in  a  curve. 

24.  When  figures  are  given  at  the  top  of  a  chart  for  each  point 
in  a  curve,  have  the  figures  added,  if  possible,  to  show 
yearly  totals  or  other  totals  which  may  be  useful  in  read- 
ing. 

25.  Make  the  title  of  a  chart  so  complete  and  so  clear  that  mis- 
interpretation will  be  impossible."  (Brinton,  "  Graphic 
Methods,"  p.  361.) 

A  movement  is  on  foot  among  those  who  are  especially 
interested  in  the  making  of  graphs  and  charts  to  secure 
some  standardized  methods.  A  tentative  report  has  al- 
ready been  made  by  a  Joint  Committee  on  Standards  for 
Graphic  Presentation.  These,  also,  will  fully  repay  care- 
ful study. 

"  The  committee  is  making  a  study  of  the  methods  used  in 
different  fields  of  endeavor  for  presenting  statistical  and  quan- 
titative data  in  graphic  form.  If  simple  and  convenient  stand- 
ards can  be  found  and  made  generally  known,  there  will  be 
found  a  more  universal  use  of  graphic  methods  with  a  conse- 
quent gain  to  mankind  because  of  the  greater  speed  and  ac- 
curacy with  which  complex  information  may  be  imparted  and 
interpreted.  The  following  are  suggestions  which  the  commit- 
tee has  thus  far  considered  as  representing  the  more  generally 
applicable  principles  of  elementary  graphic  presentation. 

1.  The  general  arrangement  should  proceed  from  left  to  right. 

2.  Where  possible  represent  quantities  by  linear  magnitude, 
as  areas  or  volumes  are  more  likely  to  be  misinterpreted. 


PRESENTATION  OF  BUSINESS  FACTS      273 

3.  For  a  curve  the  vertical  scale^  whenever  practicable,  should 
be  so  selected  that  the  zero  line  will  appear  on  the  dia- 
gram. 

4.  If  the  line  of  the  vertical  scale  will  not  normally  appear 
on  the  curve  diagram,  the  zero  line  should  be  shown  by 
the  use  of  a  horizontal  break  in  the  diagram. 

5.  The  zero  lines  of  the  scale  for  a  curve  should  be  sharply 
distinguished  from  the  other  coordinate  lines. 

6.  For  curves  having  a  scale  representing  percentages,  it  is 
usually  desirable  to  emphasize  in  some  distinguishing  way 
the  100-per  cent,  line  or  other  line  used  as  a  basis  of 
comparison. 

7.  When  the  scale  of  a  diagram  refers  to  dates,  and  the  period 
represented  is  not  a  complete  unit,  it  is  better  not  to  em- 
phasize the  first  and  last  ordinates,  since  such  a  diagram 
does  not  represent  the  beginning  or  end  of  time. 

8.  When  curves  are  drawn  on  logarithmic  coordinates,  the 
limited  lines  of  the  diagram  should  each  be  at  some  power 
of  ten  on  the  logarithmic  scales. 

9.  It  is  advisable  not  to  show  any  more  coordinate  lines  than 
necessary  to  guide  the  eye  in  reading  the  diagram. 

10.  The  curve  lines  of  a  diagram  should  be  sharply  distin- 
guished from  the  ruling. 

11.  In  curves  representing  a  series  of  observations,  it  is  advis- 
able, whenever  possible,  to  indicate  clearly  on  the  dia- 
gram all  the  points  representing  the  separate  observation. 

12.  The  horizontal  scale  for  curves  should  usually  lead  from 
left  to  right  and  the  vertical  scale  from  bottom  to  top. 

13.  Figures  for  the  scale  of  a  diagram  should  be  placed  at  the 
left  and  at  the  bottom  or  along  the  respective  axes. 

14.  It  is  often  desirable  to  include  in  the  diagram  the  numeri- 
cal data  or  formulas  represented. 

15.  If  numerical  data  are  not  included  in  the  diagram  it  is 
desirable  to  give  the  data  in  tabulated  form  accompany- 
ing the  diagram. 

16.  All  lettering  and  all  figures  on  a  diagram  should  be  placed 
so  as  to  be  easily  read  from  the  base  as  the  bottom,  or  from 
the  right-hand  edge  of  the  diagram  as  the  bottom. 

17.  The  title  of  a  diagram  should  be  made  as  clear  and  com-' 


274  COMMERCIAL  RESEARCH 

plete   as   possible.     Sub-titles   or   descriptions   should  be 
added  if  necessary  to  insure  clearness." 

Conclusion,  This  general  survey  of  graphs,  diagrams, 
tables,  and  maps  is  not  intended  to  be  all  inclusive,  but 
rather  to  be  suggestive  in  character.  In  using  these  de- 
vices for  the  presentation  of  business  facts,  it  should  be  re- 
membered that  they  are  merely  vehicles  of  expression. 
They  are  just  as  good  as  their  use,  and  no  better.  If  they 
are  not  fitted  for  the  purpose  in  view  or  if  they  are 
faulty  in  design  or  construction,  if  they  overemphasize 
certain  unimportant  facts,  then  they  fall  in  value.  In 
every  case  these  devices  should  be  used  with  great  caution. 
Checks  of  many  kinds  are  needed  to  keep  them  in  line. 
Their  primary  purpose  is  to  condense,  to  concentrate,  to 
summarize  business  data,  and  to  make  otherwise  lifeless 
and  unintelligent  figures  vivid  and  clear.  They  are,  how- 
ever, only  a  means,  not  an  end;  merely  one  further  step 
in  the  process  of  research.  He  who  uses  these  devices 
must  remember  that  no  methods  in  business  research  dare 
to  be  false  or  dishonest.  Carefulness  and  accuracy  can 
make  such  methods  as  are  discussed  here  scientific  in  con- 
struction. 


CHAPTER  IX 

INTERPRETATION    OF    BUSINESS    FACTS 

Essentials  of  interpretation  —  Mechanical  and  mathematical  tests  — 
Tested  by  new  angles  —  Test  of  adequacy  of  data  —  The  test  of  im- 
mediate serviceability  —  Test  of  too  much  data  —  Indefinite  data  — 
History  and  prophecy  in  data  —  Business  facts  and  business  policies 
—  Statistics  as  a  method  —  Superiority  of  tables  —  Conclusion. 

The  final  step  in  the  process  of  research  is  interpreta- 
tion of  data.  This  assumes  the  careful  collection  and 
analysis  and  presentation  of  the  facts.  It  assumes,  too, 
that  all  the  essential  factors  have  been  identified  and  given 
their  proper  value  in  so  far  as  it  has  been  possible.  It  is 
probably  also  the  most  important  step  in  the  entire  process 
in  that  it  makes  usable  all  the  efforts  that  have  preceded. 
Doubtless,  too,  it  is  the  most  difficult  step  to  take.  More 
depends  upon  it  in  the  matter  of  judgment  than  on  any 
other  one  activity  in  research  work.  It  is  the  keystone  to 
the  arch.  It  means  the  translating  of  many  facts  of 
varied  character  and  value  into  a  plan  of  action,  into  a 
business  policy. 

The  importance  of  interpretation  makes  necessary  even 
greater  caution  than  in  the  previous  steps  in  the  process. 
Much  depends  upon  the  judgment  of  the  individual. 
Mere  facts  can  no  longer  help.  They  have  done  their 
work.  The  interpretation,  therefore,  becomes  a  great 
test  of  the  capacity  of  the  business  manager.  "  Care, 
judgment,  insight,  and  caution  are  eternally  necessary  to 
guard  against  mistaken  views,  the  assignment  of  cause  for 
effect,  the  omission  of  qualifying  or  significant  facts,  the 

275 


276  COMMERCIAL  RESEARCH 

formation  of  false  judgment,  etc."  (Secrist,  "  Introduc- 
tion to  Statistical  Methods,"  p.  235.) 

Essentials  of  Interpretation.  The  facts  that  come  be- 
fore the  business  manager  are  of  many  different  kinds. 
They  have,  however,  been  reduced  to  some  common  basis 
in  their  classification  and  analysis.  In  most  cases,  also, 
they  have  been  assembled  for  a  definite  purpose.  The 
first  task  that  remains  is  to  inspect  them  with  great  care. 
No  man  is  to  be  deceived  either  by  an  underestimate  or  by 
an  overestimate.  The  goal  of  research  is  the  truth  How, 
then,  may  facts  of  this  kind  be  inspected  intelligently.'' 

In  the  first  place,  the  source  and  purpose  of  business 
data  must  be  ascertained.  If  they  are  from  one's  own 
business  and  if  they  are  to  form  the  basis  of  one's  own 
policy  and  practice,  then  the  control  of  their  preparation 
and  analysis  and  presentation  is  possible.  The  ideal  in  a 
case  of  this  kind  is  to  present  the  business  as  it  is,  and  the 
question  to  ask  is:  "  What  do  these  facts  show.''  "  The 
facts  that  appear  before  the  business  manager  may  have 
come  from  outside.  Indeed,  they  may  appear  for  a 
wholly  different  purpose  than  the  internal  data.  The 
whole  process  of  their  collection,  analysis,  and  presenta- 
tion may  be  aimed  primarily  at  effects  of  impression, 
rather  than  clarity  and  precision  of  expression.  Such  is 
the  case  with  many  business  facts  used  for  advertising 
purposes.  It  is  clear  that  data  of  this  kind  must  be 
judged  in  a  different  attitude  from  internal  data.  Many 
new  questions  arise  concerning  them.  Are  they  convinc- 
ing.'' What  are  the  checks  upon  such  data.''  What  is  the 
purpose  in  the  mind  of  those  who  have  prepared  these 
facts  and  what  methods  have  they  used.''  A  few  tests  for 
data,  both  internal  and  external,  arc  here  suggested. 

1.   On  the  basis  of  an  inspection  being  made  for  a  definite 


INTERPRETATION  OF  BUSINESS  FACTS      277 

purpose,  the  first  query  that  should  arise  is :  "  Are  these 
facts  pertinent  and  essential  for  the  aim  in  view  ?  "  There 
are  the  facts  of  sales.  Do  these  touch  upon  the  main  issue 
before  the  mind  of  the  manager?  This  is  a  part  of  the 
analysis,  to  be  sure,  and  in  many  cases  may  be  assumed 
to  have  been  carried  out  acceptably.  But  if  the  facts  are 
presented  from  the  outside,  the  test  of  their  being  pertinent 
and  essential  is  necessary. 

2.  Another  test  question  for  the  inspection  of  business 
data  is:  "Are  these  facts  sufficiently  comprehensive.''" 
The  task  is  difficult  enough  to  secure  a  sufficient  basis  in 
fact,  at  best,  for  a  valid  business  judgment.  No  one 
should,  therefore,  be  willing  to  accept  a  meager  supply  of 
facts  when  a  more  abundant  quantity  is  at  hand,  nor  can 
one  be  sure  that  all  of  the  essential  and  pertinent  facts  are 
before  him  unless  the  survey  has  been  sufficiently  compre- 
hensive. Most  business  problems  have  many  ramifica- 
tions. There  should  be,  therefore,  a  constant  pressure  for 
as  broad  a  survey  as  can  be  made. 

3.  A  further  test  in  the  inspection  of  data  that  have 
been  presented  is  the  question:  "Are  these  facts  suffi- 
ciently specific  and  reliable  to  form  the  basis  of  a  sound 
judgment?"  There  is  a  constant  temptation  in  business 
investigation  to  make  vague  and  general  statements  that 
are  frequently  of  no  value  for  a  guide  in  the  management 
of  a  business.  These  facts  may  be  made  up  of  a  mere 
opinion  or  a  mere  guess,  although  they  do  appear  in  the 
guise  of  definite  figures.  It  is  a  wise  policy  to  examine 
carefully  to  see  that  the  facts  are  in  reality  specific  as 
applied  to  the  problem  in  mind,  and  then  to  inquire  care- 
fully into  their  reliability.  This  device  is  especially  per- 
tinent when  the  data  have  been  gathered  outside  of  the 
business  and  are  secured  from  uncontrolled  sources. 


278  COMMERCIAL  RESEARCH 

4.  A  further  test  of  business  facts  is :  "  Are  they 
homogeneous?"  Data  may  be  falsely  classified,  without 
having  been  reduced  to  a  common  basis  or  a  single  princi- 
ple. In  such  a  cas3  any  conclusion  drawn  from  them  is  of 
no  value.  Although  business  facts  are  of  countless  va- 
riety, it  is  possible  to  reduce  most  of  them  to  a  definite 
principle  provided  they  are  used  properly.  In  order  to 
reduce  these  variegated  facts  to  a  single  principle,  it  is 
necessary  that  a  common  unit  be  used  in  all  calculations. 
This  question  has  been  discussed  at  length  in  the  analysis 
of  business  data.  It  must  be  emphasized,  however,  that  in 
the  interpretation  of  business  facts  one  test  that  must  be 
applied  is  this  test  of  a  common  unit.  Averages  are  not 
valid,  are  not,  in  fact,  real  averages,  unless  they  have  been 
reduced  to  some  such  common  denominator.  In  no  other 
case  are  these  facts  comparable  or  usable  for  the  establish- 
ment of  a  rule  of  action. 

5.  A  further  query  to  make  in  the  inspection  of  business 
data  is :  "  Are  these  facts  correlated.'^  "  This  is  in  real- 
ity the  fundamental  test  of  all  tables,  graphs,  and  charts. 
There  must  be  a  logical  process  behind  the  facts  presented. 
There  should  be  evidence  of  the  working  of  the  principle 
of  cause  and  effect.  This  is  probably  the  most  important 
point  in  the  interpretation  of  business  data.  Indeed,  sta- 
tistics fell  into  disrepute  because  this  principle  of  cause 
and  effect,  the  general  principle  of  correlation,  was  not  re- 
garded. Mere  incidental  relationships  were  interpreted  as 
consequences  and  results. 

In  order  to  ascertain  whether  this  element  of  correlation 
exists  in  business  data,  it  is  necessary  to  look  at  what  is 
beneath  them.  They  must  be  checked  and  tested  by  some 
method.  It  must  be  remembered,  also,  that  charts, 
graphs,  and  maps  do  not  prove  anything  in  and  of  them- 


INTERPRETATION  OF  BUSINESS  FACTS      279 

selves.  Averages,  modes,  and  tendencies  are  not  in  them- 
selves activities  or  forces.  The}'  can  only  be  results,  con- 
sequences, effects  of  forces  at  work.  "  An  average  is  not 
to  be  regarded  as  a  secret  something  which  determines 
events.  There  may  be  an  average  in  birth  and  death  and 
crime  but,  after  all,  the  average  is  not  responsible  for  any 
of  them.  It  takes  something  more  potent  than  an  average 
to  produce  typhoid  fever  or  to  crack  a  safe."  (Coffey, 
"  The  Science  of  Logic,"  Vol.  II,  p.  291.) 

It  is  not  by  any  means  easy  in  all  cases  to  know  when 
material  is  really  correlated.  A  general  rule  for  testing 
material  from  this  point  of  view  has  been  stated  as  fol- 
lows :  "  When  two  quantities  are  so  related  that  the  fluc- 
tuations in  one  are  in  sympathy  with  the  fluctuations  in 
the  other  so  that  an  increase  or  decrease  in  one  is  found 
in  connection  with  an  increase  or  decrease  (or  inversely) 
in  the  other,  and  the  greater  the  magnitude  of  the  changes 
in  the  one,  the  greater  the  magnitude  of  the  changes  in  the 
other,  the  quantities  are  said  to  be  correlated."  (Bow- 
ley,  "Elements  of  Statistics,"  p.  316.)  The  correct 
method  of  presenting  business  facts  will  help  greatly  in 
determining  whether  this  rule  applies  or  not. 

This  element  of  correlation  may  take  two  or  more  dif- 
ferent forms.  One  of  these  forms  may  be  the  principle  of 
cause  and  effect.  "  Correlation  means  that  between  two 
series  or  groups  of  data  there  exists  some  causal  connec- 
tion," (King,  "  Eleaients  of  Statistical  Methods,"  p. 
197.)  Facts,  however,  may  be  correlated  when  it  is  not 
possible  to  establish  such  a  causal  connection.  If  the 
sympathetic  movement  indicated  in  the  definition  given 
above  is  observed  without  exception,  and  a  sufficiently 
great  number  of  times,  there  arises  in  the  mind  the  prin- 
ciple of  association  between  the  series  or  groups  of  data. 


280  COMMERCIAL  RESEARCH 

It  is  probable  that  a  large  part  of  business  facts  may  be 
judged  on  the  basis  of  association  rather  than  on  the 
basis  of  causal  connection.  The  business  man  is  accus- 
tomed to  associate  various  changes  in  trade  conditions. 
He  watches,  for  example,  the  bank  clearings  in  certain 
trade  centers,  such  as  Chicago  or  New  York.  As  these 
clearings  vary  in  amount  he  draws  conclusions  that  certain 
changes  have  occurred  in  trade.  Of  course,  the  principle 
of  association  may  be  carried  far  beyond  justifiable  rea- 
soning. It  is  on  this  basis  that  most  of  the  weather  pre- 
dictions and  rural  traditions  have  grown  up.  There  may 
be  no  scientific  relationship  between  heavy  snows  and  good 
crops,  even  though  a  partial  connection  can  be  established. 

It  is  not  possible  to  emphasize  this  test  too  strongly. 
To  those  who  are  not  on  their  guard  the  conclusiveness  of 
data,  neatly  presented,  with  totals  and  averages  and  per- 
centages carefully  calculated,  has  a  strong  appeal.  In 
the  case  of  diagrams,  charts,  and  maps  the  psychological 
appeal  is  so  great  as  frequently  to  overcome  good  judg- 
ment. "  It  is  their  appeal,  their  smug  finality,  which  sug- 
gest their  virtues  and  at  the  same  time  conceal  their  weak- 
ness." (Secrist,  "Introduction  to  Statistical  Methods," 
p.  232.)  It  is  because  of  this  danger,  that  some  clever 
method  of  presentation  may  conceal  the  weakness  of  busi- 
ness facts,  that  a  careful  inspection  for  the  principle  of 
correlation  has  been  insisted  upon. 

6.  Another  test  to  be  applied  to  business  statistics  has 
to  do  with  their  sources.  Business  facts  may  come  before 
the  manager  either  at  first  hand  or  at  two  or  more  removes 
from  their  origin.  The  query  to  be  kept  in  mind  in  in- 
specting them  from  this  point  of  view  is  whether  there  is 
any  reason  to  suspect  an  entrance  of  personal  bias.  Here, 
again,  there  will  be  a  distinction  between  facts  from  inside 


INTERPRETATION  OF  BUSINESS  FACTS      281 

sources  and  facts  from  outside  sources.  This  process  is 
merely  a  reworking  of  the  methods  of  classification  and 
collection  in  order  to  place  a  check  upon  them.  Under 
this  heading  there  are  the  tests  of  authority,  which  will 
apply  to  reports  as  well  as  maps  and  charts.  The  opin- 
ion of  an  expert  will  naturally  carry  far  more  weight 
than  the  opinion  of  one  without  reputation.  The  general 
principle  in  this  case  is  that  the  data  can  be  only  as  good 
as  the  source  from  which  they  are  derived. 

7.  Business  data  should  further  be  tested  by  the  aim  in 
view.  The  production  manager,  for  instance,  will  want  a 
certain  set  of  facts,  probably  from  the  sales  manager,  an- 
other set  of  facts  from  the  purchasing  agent.  Each  of 
these  managers  can  furnish  to  best  advantage  a  special 
kind  of  data.  An  inspection  should  show  whether  they 
have  kept  within  their  field  and  whether  they  have  fur- 
nished an  adequate  amount.  The  advertising  manager 
also  has  his  particular  point  of  view.  The  facts  which 
he  can  give  may  be  of  the  same  character  as  those  offered 
by  the  sales  manager,  and  yet  they  will  not  be  the  same 
in  purport.  The  business  manager,  whose  duty  is  to  con- 
trol the  entire  system  of  management,  desires  the  proper 
perspective  in  his  survey  of  facts.  His  inquiry  is  as  to 
whether  the  records  offer  an  intelligent  basis  for  judgment. 

8.  The  business  facts  that  come  before  the  manager  in 
the  form  of  a  table  or  chart  or  map,  must  be  unmasked. 
It  may  be  that  considerable  artistic  effort  has  been  de- 
voted to  their  presentation.  Many  subtle,  psychological 
influences  may  thus  have  been  added  to  the  facts  them- 
selves. The  present  war  has  contributed  many  words  and 
phrases  to  our  everyday  vocabulary.  One  of  these,  and 
one  of  the  most  useful,  is  "  camouflage."  This  term  can 
be  applied  to  the  interpretation  of  business  facts.     Atten- 


282  COMMERCIAL  RESEARCH 

tion  is  frequently  centered  by  many  artful  devices  upon 
the  answer  rather  than  upon  the  evidence  or  proof. 

In  the  old-fashioned  books  on  arithmetic,  answers  to 
the  problems  were  given  either  in  the  back  of  the  book  or 
at  the  end  of  each  problem  itself.  Many  pupils  who  used 
these  books  that  gave  the  answers  did  not  always  want  to 
work  the  problem  through  to  r(?ach  the  desired  goal. 
They  knew  beforehand  what  the  teacher  wanted  and  some- 
times to  save  mental  effort  they  would  start  with  the  an- 
swer and  work  back  through  the  problem ;  or  they  would 
put  down  the  answer  without  having  proved  it.  Unfortu- 
nately, some  such  pupils  have  grown-  up  into  business  men. 
An  example  of  this  point  is  illustrated  by  this  map  which 
attempts  to  emphasize  the  central  position  of  Chicago  as 
a  market. 

It  will  be  noted  that  the  effect  of  the  arrows  centered  in 
direction  toward  Chicago  in  reality  overemphasizes  the  po- 
sition of  that  trade  center.  It  is  also  clear  that  these 
arrows,  although  they  may  represent  concrete  data,  do 
not  prove  any  definite  thing.  Suppose,  for  example,  their 
direction  was  charted  so  that  they  all  pointed  toward  St. 
Louis.  They  might  even  more  forcibly  emphasize  the 
central  position  of  that  city.  It  is  not  intended  here  to 
call  into  question  the  data  upon  which  the  map  is  based, 
but  only  to  point  out  that  such  a  method  of  presenting 
the  facts  must  be  carefully  scrutinized  lest  a  false  impres- 
sion be  given.  If  the  arrows  in  the  map  were  drawn  in  a 
directly  opposite  direction,  the  effect  would  be  far  different 
from  what  is  given  here.  This  kind  of  interpretation  may 
be  called  unmasking  the  facts  in  the  method  of  presenta- 
tion. 

9.  Another  test  to  be  applied  to  businss  data  is  that  of 
comparison.     All  statistical  methods  have  for  their  ulti- 


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284  COMMERCIAL  RESEARCH 

mate  aim  some  kind  of  comparison.  The  use  of  units, 
averages,  and  all  other  statistical  devices  is  to  reduce  dis- 
similar facts  to  such  a  basis  that  they  can  be  compared. 
"  Comparison  is,  in  general,  the  final  goal  toward  which 
all  statistical  studies  tend."  (King,  "  Elements  of  Sta- 
tistical Methods,"  p.  186.) 

On  this  basis  the  business  facts  should  be  checked  up  in 
a  number  of  ways.  It  is  wise,  for  instance,  that  experi- 
ence be  used  as  the  background  for  judging  business  facts. 
The  business  man  who  is  interested  in  research  work 
should  also  test  the  facts  by  his  own  observation.  It  is 
likely  that  he  will  do  so  in  any  case,  because  one's  judg- 
ment is  very  largely  based  upon  experience  and  observa- 
tion. Furthermore,  it  is  necessary  always  to  keep  one's 
judgment  alert.  While  the  danger  may  be  that  the  busi- 
ness manager  will  tend  to  become  too  conservative,  a  word 
of  caution  is  nevertheless  necessary  to  put  him  on  his 
guard.  One  must,  of  course,  constantly  be  open-minded, 
and  yet  one  should  never  be  swept  off  his  feet. 

One  comparative  test  is  by  means  of  past  records. 
Suppose  the  immediate  problem  is  one  of  determining  how 
much  working  capital  is  needed  in  a  given  business.  The 
facts  bearing  upon  this  question  that  are  presented  for  a 
given  fiscal  period  may  be  tested  by  the  experience  of  last 
season,  by  the  experience  of  last  year,  or  the  last  several 
years.  It  is  wise  in  this  connection  to  remember  that  there 
is  a  general  business  principle  involved.  Business  for  the 
most  part  is  a  going  concern.  The  prices,  for  instance, 
of  most  commodities  are  not  made  from  the  foundation  up 
day  by  day.  To-day's  prices  are  but  a  modification  of 
yesterday's,  and  to-morrow's  will  be  merely  a  change  from 
to-day's  on  the  basis  of  changing  conditions.     A  compara- 


INTERPRETATION  OF  BUSINESS  FACTS      285 

tive  view  of  one's  business  is  therefore  quite  essential  to 
careful  management. 

Suppose  an  offer  is  made  that  one  buy  a  share  in  a 
business.  This,  too,  is  a  going  concern.  The  problem  is 
to  determine  a  fair  value  of  a  share  in  this  business.  One 
man  in  a  situation  of  this  kind  said :  "  Let  me  see  your 
records  of  gross  sales  for  the  past  three  years  and  I  will 
tell  you  what  I  will  be  willing  to  give  you  for  a  share  of 
your  business."  With  these  facts  as  a  basis  of  compari- 
son he  made  his  estimate  of  the  value  of  that  particular 
concern. 

The  point  to  be  emphasized  in  this  connection  is  that 
data  which  are  presented  to  the  business  manager  should 
be  compared  with  all  other  kinds  of  facts  that  will  in  any 
way  test  their  validity.  Records  should  be  kept  with  this 
aim  in  view.  Comparison  is  essential  for  a  more  complete 
knowledge  of  one's  own  business,  and  some  basis  of  com- 
parison is  needed  to  check  up  data  coming  from  outside 
sources.  An  essential  element  of  all  business  research  is 
this  test  of  comparison. 

10.  Mechanical  and  Mathematical  Tests.  Where  the 
method  of  presentation  of  business  facts  takes  the  form 
of  charts,  graphs,  or  maps,  it  is  a  wise  policy  to  apply 
certain  simple  mechanical  and  mathematical  tests.  These 
devices  should  be  tested  in  the  first  place  by  the  general 
principles  of  construction.  Such  rules  have  been  stated 
and  illustrated  in  the  preceding  discussion.  They  should 
now  be  recalled  and  applied  in  the  inspection  of  the  charts, 
graphs,  and  maps.  The  obvious  purpose  will  be  to  see 
whether  or  not  the  rules  have  been  followed. 

It  is  particularly  important  in  the  case  of  compara- 
tive lines  and  figures  that  such  mechanical  and  mathemati- 


286  COMMERCIAL  RESEARCH 

cal  tests  should  be  applied.  It  is  so  easy  to  exaggerate 
the  movement  in  the  chart  lines  or  to  level  out  the  curves, 
that  comparisons  are  both  difficult  and  deceptive.  The 
unit  used  as  the  scale  of  construction  for  these  lines  must 
be  carefully  considered.  Even  the  position  of  the  line  or 
figure  on  the  chart  may  have  a  special  significance.  If  the 
base  line  in  the  chart  does  not  represent  zero,  but  some 
high  figure,  the  position  of  the  lines  may  be  misrepresen- 
tative.  As  has  been  said,  where  the  comparison  lies  in  the 
relative  size  of  figures,  it  is  extremely  difficult  to  secure  a 
fair  and  true  judgment. 

There  is  further  the  question  of  the  relative  movement 
of  the  lines  in  a  chart.  Suppose  one  has  plotted  the  total 
production  of  a  given  commodity  through  a  definite  period. 
Assume,  also,  that  on  the  same  chart  there  is  drawn  a  line 
representing  the  value  in  dollars  and  cents  of  this  com- 
modity. In  case  these  two  lines  move  together  in  the  same 
direction,  what  conclusions  may  be  drawn?  On  the  other 
hand,  suppose  that  they  move  inversely  or  in  contrary 
directions  —  what  different  conclusion  will  follow?  It  will 
be  seen  from  these  illustrations  that  the  entire  character 
of  a  chart  or  graph  may  be  changed  by  mechanical  means. 
It  becomes  necessary,  therefore,  to  inspect  these  mechani- 
cal means  critically. 

There  is  also  the  question  of  the  area  of  figures.  Where 
such  geometric  figures  as  circles,  squares,  rectangles, 
cubes,  or  pyramids  are  used  for  graphic  presentation, 
there  is  constantly  the  mathematical  test  of  size ;  presum- 
ably, there  is  a  direct  relation  between  the  relative  sizes  of 
these  figures.  It  is  to  be  remembered,  however,  that  fig- 
ures of  two  dimensions,  length  and  breadth,  plane  figures, 
vary  with  the  squares  of  their  dimensions,  while  solid  fig- 
ures, those  with  three  dimensions,  vary  as  their  cubes.     If 


INTERPRETATION  OF  BUSINESS  FACTS      287 

these  figures  have  been  constructed  by  mathematical  prin- 
ciples they  must  also  be  jud'ged  by  the  same  principles. 

11.  Tested  hy  New  Angles.  It  has  long  been  a  famil- 
iar saying  that  all  roads  lead  to  Rome.  This  may  mean 
that  the  same  idea  may  be  approached  from  various  points 
of  view.  Some  methods  will  be  more  direct  and  simpler 
than  others,  but  nevertheless  a  good  test  of  the  correct- 
ness of  conclusions  is  to  approach  the  subject  from  dif- 
ferent angles.  It  is  not  always  true  in  commercial  inves- 
tigation that  the  straight  and  narrow  way  alone  leads  to 
the  haven  sought.  Roundabout  ways  may  be  followed  not 
only  without  disaster  but  with  very  desirable  results. 
Take,  for  example,  the  question  of  the  farm-tractor  mar- 
ket in  the  United  States.  Certain  investigations  had 
been  made  into  this  question  before  the  market  demand  was 
disrupted  and  made  chaotic  by  war  influences.  An  esti- 
mate was  made  of  the  size  of  the  potential  demand  within 
the  United  States  for  the  farm  tractor.  In  order  to  test 
the  conclusions  reached,  the  subject  was  approached  from 
more  than  one  point  of  view.  One  method  used  was  to 
calculate  the  potential  tractor  market  on  the  basis  of  the 
number  and  size  of  farms.  It  was  learned  from  the  United 
States  Census  that  there  are  in  the  United  States  6,361,- 
000  farms,  of  which  number  1,153,605  contain  175  acres 
or  more,  and  1,516,286  contain  between  100  and  174*  acres. 
The  investigation  assumed  that  the  farm  of  175  acres  or 
more  was  large  enough  to  support  a  farm  tractor.  There 
were,  of  course,  many  factors  which  would  cut  down  this 
total  number,  such  as  lack  of  fertility,  the  roughness  of 
the  land,  and  the  character  of  the  products  groAvn.  To 
be  conservative,  therefore,  the  estimate  was  made  that 
three-fifths  of  this  number  of  farms  really  offered  a  poten- 
tial market  for  the  tractor.     Likewise,  the  smaller  farms, 


288  COMMERCIAL  RESEARCH 

running  from  100  to  174  acres,  might  in  certain  cases 
afford  tractor  possibilities.  One  fifth  of  this  number  was 
taken  as  an  estimate  of  those  that  might  use  this  farm 
implement.  From  these  calculations  the  conclusion  was 
drawn  that  the  total  potential  tractor  market  in  the 
United  States  was  approximately  1,000,000. 

In  order  to  test  the  validity  of  this  conclusion,  the  sub- 
ject was  approached  from  the  point  of  view  of  horse 
power  used  on  the  farm.  The  figures  are  as  follows : 
The  total  horse  power  on  the  farms  furnished  by  horses 
and  mules  is  about  15,000,000.  Assuming  that  50%  of 
this  power  might  be  furnished  by  tractors,  the  resulting 
demand  would  be  7,500,000  horse  power,  or  an  equivalent 
of  750,000  tractors  on  the  average  of  ten  horse  power  per 
tractor.  To  this  must  be  added  the  displacement  of  gas 
engines  now  in  use  on  the  farm  by  the  farm-tractor  engine. 
The  estimate  here  Avas  3,000,000  horse  power,  or  an  equiv- 
alent of  150,000  tractors,  that  furnished  twenty  horse 
power  each.  Further  inroads  would  be  made  into  the  use 
of  steam  for  tractor  power  on  the  farm  by  the  new  farm 
implement.  This  is  represented  by  2,000,000  horse  power, 
or  an  equivalent  of  100,000  tractors  of  the  10-20  type. 
The  sum  total  of  these  figures  also  approximates  1,000,000 
tractors. 

The  same  problem  was  approached  from  a  third  angle. 
This  was  the  buying  power  of  the  farmer.  A  comparison 
was  made  here  between  the  purchasing  power  demonstrated 
by  the  buying  of  automobiles  among  the  farmers  with  the 
possibility  of  directing  this  purchasing  power  to  farm 
tractors.  From  this  point  of  view,  also,  it  seemed  clear 
that  the  market  for  farm  tractors  was  a  reality.  It  was 
argued  that  if  the  farmers  have  already  bought  1,260,000 
automobiles  for  cash,  they  will  be  willing  to  buy  an  equal 


INTERPRETATION  OF  BUSINESS  FACTS      ^89 

number  of  tractors.  From  all  these  points  of  view,  the 
conclusion  was  that  there  existed  in  the  United  States  a 
very  large  potential  market  for  farm  tractors.  The  fig- 
ures developed  from  two  methods  of  investigation  pointed 
directlj'  toward  a  potential  market  for  1,000,000  or  more. 
When  these  were  checked  up  by  some  data  on  purchasing 
power,  a  third  point  of  view  seemed  to  coincide  with  the 
first  two.  This  method  illustrates  the  way  in  which  the 
business  facts  may  be  approached  from  new  angles  and 
certain  checks  placed  upon  the  data  offered. 

12.  Test  of  Adequacy  of  Data.  The  constant  weakness 
in  business  investigation  is  the  drawing  of  a  conclusion 
before  sufl^cient  data  have  been  secured.  The  pertinent 
query  in  this  connection  is:  "How  much  is  enough.'*" 
A  general  principle  that  should  serve  as  a  guide  in  answer- 
ing this  question  has  already  been  developed.  It  is  that 
the  number  of  items  to  be  inspected  will  vary  directly  with 
the  similarity  of  the  items  in  a  group.  A  large  field  is 
left  here  for  the  individual  judgment  and  no  doubt  com- 
mon sense  will  direct  one  wisely,  provided  he  understands 
the  nature  of  the  problem  clearly.  It  may  be  that  one 
cannot  tell  in  a  given  case  immediately  and  directly  how 
large  a  mass  of  data  should  be  accumulated.  But  the 
adequacy  may  be  tested  by  indirect  methods  as  suggested 
above. 

Take  an  instance  from  the  data  upon  which  certain  ad- 
vertisements have  been  based.  A  popular  magazine  in 
order  to  show  the  advertising  value  of  its  columns  made  an 
investigation  into  524  automobile  sales.  The  survey  was 
carried  on  apparently  by  means  of  a  questionnaire  sent 
through  the  mail.  The  point  here,  however,  is  to  examine 
the  adequacy  of  the  data  upon  which  the  conclusions  are 
based.     One    of   these    conclusions    is    stated    as    follows : 


290  COMMERCIAL  RESEARCH 

"  In  80.5%  of  the  instances  in  which  the  woman's  '  say ' 
was  indicated,  his  wife  wielded  a  potent  influence."  The 
question  at  once  arises  as  to  the  proper  basis  for  such  a 
broad  inference.  The  term  "  say  "  is  entirely  too  indefi- 
nite for  any  valid  conclusion.  The  same  is  true  of  the 
clause,  "  wielded  a  potent  influence."  But  even  apart 
from  these  criticisms  it  should  be  pointed  out  that  524 
instances  may  or  may  not  represent  automobile  sales  in 
general.  It  is  probable  that  they  are  not  representative 
unless  they  have  been  most  carefully  selected,  and  cer- 
tainly it  is  not  a  scientific  process  to  tabulate  indefinite 
data  and  from  these  draw  a  definite  percentage,  upon 
which  a  business  policy  is  to  be  based. 

Another  conclusion  drawn  from  the  same  investigation 
was  based  upon  the  fact  that  in  every  state  where  the  sub- 
scriptions to  this  magazine  were  concentrated,  in  the  same 
areas,  there  was  a  concentration  of  automobile  registra- 
tion. The  inference  to  be  made  from  this  conclusion  was 
that  there  is  little  waste  in  the  advertising  through  the 
columns  of  this  magazine.  Brief  inspection  will  reveal  the 
fact  that  there  is  not  adequate  material  for  such  an  infer- 
ence. It  is,  in  reality,  a  case  of  coincidence  and  not  of 
correlation.  The  basis,  in  fact,  is  altogether  too  meager 
for  a  valid  conclusion. 

The  purchasing  agent  for  a  large  retail  grocer  was  re- 
cently complaining  because  so  many  of  his  purchases  had 
to  be  made  on  the  basis  of  a  guess  rather  than  knowledge. 
It  was  necessary  for  him  to  order  large  quantities  of  at 
least  twenty  different  commodities,  but  the  market  influ- 
ences affecting  this  score  of  products  were  known  to  him 
only  in  a  vague  and  hazy  fashion.  After  an  order  had 
been  sent  in  he  frequently  wondered  if  he  had  in  this  case 
"  guessed  right."     The  reason  for  such  methods  in  busi- 


INTERPRETATION  OF  BUSINESS  FACTS      291 

ness  is,  of  course,  that  inadequate  data  have  been  furnished 
for  establishing  a  poHcy  or  a  rule  of  action. 

13.  The  Test  of  Immediate  Serviceability.  Most  busi- 
ness men  work  under  a  high  pressure.  Executives  and 
managers,  in  particular,  have  thrust  upon  them  a  great 
mass  of  details  which  they  must  handle  as  best  they  can 
under  the  constant  demand  for  their  attention  elsewhere. 
"  A  good  executive  has  been  described  as  a  man  who  de- 
cides quickly  and  who  is  sometimes  right.  Probably 
ninety  per  cent  of  the  answers  '  Yes  '  or  '  No  '  given  by  a 
business  man  are  based  on  opinion  rather  than  fact.  The 
trouble  is  that  the  average  executive  cannot  obtain  and 
analyze  facts  quickly  enough  to  base  his  decision  on  them." 
(Brinton,  "Graphic  Methods,"  p.  288.)  This  is  prob- 
ably an  overstatement  of  the  case,  but  if  it  is  assumed  to 
be  true,  it  means  that  business  data  are  being  translated 
into  business  practice  without  careful  consideration. 
When  the  affirmative  or  negative  answer  has  been  given, 
the  business  then  becomes  legally  and  financially  responsi- 
ble for  results.  This  is  sufficient  evidence  to  show  the  need 
for  making  all  business  data  immediately  serviceable  for 
the  business  manager.  One  test,  therefore,  which  is  to  be 
applied  to  the  data  as  it  is  presented  is  this  test  of  quick 
use. 

14.  Test  of  Too  Much  Data.  In  close  connection  with 
the  preceding  point  is  the  further  test  of  overwhelming  the 
manager  with  details.  Methods  of  analysis  and  methods 
of  presentation  aim  to  give  clear,  concentrated  summaries 
of  dissimilar  details.  Unless  this  is  accomplished,  the  re- 
search work  is  not  adequate.  It  is,  or  course,  wise,  as  has 
been  said,  to  have  too  much  rather  than  too  little,  but  the 
ideal  is  to  find  the  narrow  trail  between  these  two.  One 
main  point  to  keep  in  consideration  is  that  when  actual 


292  COMMERCIAL  RESEARCH 

proof  is  given,  enough  has  been  said.  There  is  no  need  to 
pile  up  evidence  when  once  the  case  has  been  won.  Added 
facts  may  be  true,  but  they  are  not  needed,  and  data  that 
are  not  needed  are  cumbersome. 

15.  Indefinite  Data.  It  has  already  been  pointed  out 
that  much  business  data  does  not  lend  itself  to  tabulation. 
This  may  be  the  case  even  where  actual  figures  represent 
the  data.  The  reason  for  their  not  being  fitted  to  tables 
is  that  they  are  too  indefinite  in  character.  Too  much 
has  been  taken  for  granted.  There  are  too  many  outside 
forces  at  work  that  have  not  found  expression  in  the  fig- 
ures. This  makes  them  exceedingly  difficult  to  interpret. 
An  example  of  this  kind  of  business  facts  may  be  shown 
by  the  following  quotation  from  the  report  made  by  the 
Consumers'  Information  Bureau.  It  is  said  that  this  in- 
vestigation of  rural  markets  covered  every  state  in  the 
Union.  Some  of  the  so-called  "  interesting  facts  "  are 
given  as  an  illustration  of  indefinite  data. 

3.  "  In  what  city  do  the  men  buy  their  suits,  overcoats, 
shoes,  etc.,  or  do  they  buy  altogether  by  mail? 

All  by  mail " '.  .  16% 

All  in  home  town 52% 

Partly  by  mail  and  partly  at  home 14% 

All  in  near-by  city 18% 

Size  of  near-by  cities:  under  10,000.  .  .  .16% 

10,000-25,000 8% 

25,000-100,000 25% 

Over   100,000 51% 

4.  What  is  the  average  price  of  the  men's  suits,  and  are 
they  (a)  made  to  order,  (b)  ready-made,  or  (c)  ordered 
from  sample? 

Under  $20 59% 

Over    $20 41% 

Ready-made 74% 

Made  to  order 26% 


INTERPRETATION  OF  BUSINESS  FACTS      293 

5.  Have   you   a  labor-saving  kitchen   cabinet,  in  which   to 
keep  dishes,  flour,  spices,  utensils,  etc.? 

Have  cabinet 44% 

Do  not  have 56%  " 

Some  interesting  information  may  be  gleaned  from  the 
"  interesting  facts  "  given  above,  but  they  are  too  indefi- 
nite for  any  precise  treatment.  Even  a  brief  inspection 
will  reveal  to  any  one  many  of  the  elements  of  haziness 
contained  in  them.  The  chief  reason  for  these  elements 
lies  in  the  character  of  the  questions  asked.  It  is  not  pos- 
sible to  gather  by  means  of  such  questions  business  data 
that  can  be  scientifically  classified  and  analyzed. 

History  and  Prophecy  in  Data.  The  business  manager 
will  probably  want  to  inspect  the  material  which  comes 
before  him  primarily  to  discover  the  present  conditions  of 
his  business.  He  may  have  as  a  secondary  purpose,  how- 
ever, to  gain  a  background  for  immediate  judgment  and 
also  to  isolate  the  facts  that  point  to  the  future.  It  is  a 
part  of  the  task  of  the  manager  to  know  what  to  avoid  as 
well  as  to  know  what  to  emphasize.  In  order  to  act 
wisely  in  this  matter,  it  is  necessary  for  him  to  look  into 
the  history  of  his  own  business  and  then  to  turn  prophet 
in  order  to  anticipate  the  future.  For  this  secondary 
purpose  he  needs  a  historical  survey  of  the  experience  of 
his  own  concern  and  he  needs  to  have  selected  for  him  the 
most  essential  facts  that  show  the  trend  of  affairs. 

There  is  now  a  disruption  of  old  market  conditions. 
Business  tried  to  go  on  as  usual  under  a  war  demand  but 
q'uickly  found  that  this  was  impossible,  because  a  war 
demand  was  not  a  usual  demand.  Business  managers  were 
keenly  alive  to  the  rapid  changes  that  were  taking  place 
and  they  were  anxiously  scanning  their  own  records  for 
some  clew  to  these  changes.     In  the  period  of  readjust- 


294  COMMERCIAL  RESEARCH 

ment  that  is  upon  us,  some  kind  of  calculation  must 
be  made.  Progressive  business  managers  are  looking 
ahead  anxiously  to  these  changes  of  reconstruction. 
Even  now  they  are  beginning  to  collect  business  data  with 
a  view  to  forecasting  these  changes  and  anticipating  their 
effects. 

Business  Facts  and  Business  Policies.  It  has  been  said 
that  the  moment  of  interpretation  is  the  vital  and  crucial 
moment.  All  too  frequently  this  time  comes  under  heavy 
pressure  of  duty  or  of  persuasion.  Without  time  for  re- 
flection a  momentous  decision  must  be  made.  In  a  sur- 
rounding of  this  kind  it  is  most  difficult  to  be  impersonal  in 
judgment.  Under  the  persistent  call  of  duty,  or  under 
the  subtle  influence  of  another's  persuasion,  the  business 
manager  must  seek  to  be  sternly  just  at  all  times.  It  is 
probably  true  that  the  time  and  appeal  pressure  will 
determine  the  extent  of  inspection  for  testing  business 
data.  The  natural  consequence  is  that  some  rules  of 
thumb  still  persist  or  are  likely  to  develop. 

The  leaders  among  credit  men  have  been  among  the 
first  to  appreciate  the  need  for  more  careful  analysis  of 
trade  conditions.  But  even  the  most  progressive  of  these 
are  still  bound  by  rules  of  action  which  develop  from  gen- 
eral experience.  Take,  for  instance,  the  financial  busi- 
ness statements  that  are  now  usually  demanded  as  a  basis 
of  credit  relations.  From  these  statements  the  credit  man 
will  instantly  select  certain  items  upon  which  to  base  his 
judgment.  These  items  will  at  least  be  the  first  step  in 
analysis.  On  one  side  of  the  account  will  be  the  "  quick 
assets,"  or  the  "  liquid  accounts,"  as  they  are  variously 
called.  On  the  other  side  will  be  the  liabilities.  It  is  the 
general  practice  for  the  credit  man  to  rely  most  on  these 
items  for  forming  his  judgment.     The  liquid  assets  will 


INTERPRETATION  OF  BUSINESS  FACTS      295 

be  made  up  of  cash  and  the  bills  and  accounts  receivable. 
Now,  in  spite  of  all  this  appearance  of  careful  and  thor- 
ough analysis,  a  general,  empirical  rule  is  used.  "  Credit 
men  have  a  rough  rule  that  there  should  be  $2  of  quick 
assets  for  every  dollar  of  current  liabilities.  Also,  the 
total  of  the  liquid  assets  should  be  about  sufficient  to  pay 
half  the  current  liabilities."  (Skinner,  Kramer,  and 
White,  "Credits  and  Collections,"  p.  73.)  It  may  thus 
be  seen  that  there  is  still  a  temptation  to  put  new  wine 
in  old  bottles,  by  attempting  to  fit  business  facts  into  t^^e 
old  framework  of  rules-of-thumb  methods. 

It  is  not  meant  to  imply  by  this  statement  that  such  an 
inspection  of  financial  and  business  conditions  is  the  sole 
basis  upon  which  credit  is  granted  or  refused.  These 
precise  data  are  once  more  fitted  into  their  framework  of 
intangible  and  untabulatable  facts.  One  of  the  leading 
credit  men  of  the  country  has  indicated  that  certain  other 
essential  characteristics  are  necessary  for  an  intelligent 
granting  of  credit.  These  items  are  the  character  of  the 
business  manager,  his  ability  as  a  business  man,  and  the 
amount  of  capital  under  his  control.  The  point  is  that  in 
the  midst  of  all  the  new  inquiry  there  still  persists  the  old 
rough-and-ready  rule  for  judging  business  data. 

Statistics  as  a  Method.  Much  emphasis  has  been  placed 
in  this  discussion  upon  the  need  of  comparing  business 
facts.  Nothing  that  is  said  here  should  take  away  from 
the  desirability  of  making  such  comparisons.  It  must  be 
pointed  out,  however,  that  such  comparisons  are  usually 
based  upon  those  facts  that  are  fitted  to  be  dealt  with  by 
purely  statistical  methods.  Again  and  again,  attention 
has  been  called  to  the  more  or  less  obvious  fact  that  data 
which  can  be  tabulated  arc  not  the  whole  business  story. 
In  fact,  most  comparisons  are  unsafe  when  complete  re- 


296  COMMERCIAL  RESEARCH 

liance  is  placed  on  statistical  data  alone.  "  Too  fre- 
quently the  desire  for  statistical  regularity  and  conform- 
ity is  so  dominant  that  the  limitations  of  both  statistics 
and  statistical  method  are  forgotten  or  ignored.  It  is 
inadequate  simply  to  test  the  appropriateness  of  statistical 
devices.  It  is  the  condition  affecting  the  origin,  methods 
of  collection,  tabulation,  and  so  forth  which  must  be  kept 
in  mind."  (Secrist,  "Introduction  of  Statistical  Meth- 
ods," p.  467.) 

A  warning  of  this  kind  is  needed  lest  one  who  takes  up 
commercial  research  for  the  first  time  gives  too  enthusi- 
astic an  acceptance  to  these  statistical  methods.  Their 
completeness  and  their  "  smug  finality  "  tempt  one  to  rely 
on  them  wholly.  Too  great  assurance  is  dangerous. 
Business  facts,  to  be  judged  rightly,  must  be  thrown  on 
the  background  of  that  seething  vortex  of  dynamic  forces 
called  business.  There  are  so  many  factors  of  prime 
importance  unaccounted  for  in  the  charts,  graphs,  maps, 
tables ;  there  are  the  uncontrolled  will  to  buy  or  to  refuse 
to  buy  of  the  individual  consumer,  the  whim,  the  fancy, 
the  prejudice,  the  tradition,  and  the  unexpected  reaction 
of  those  unknown  persons  that  make  up  a  market.  To- 
day it  is  possible  to  go  only  a  little  way  in  reducing  these 
factors  to  statistical  method,  and  yet  all  commercial  re- 
search is  centered  finally  in  the  consumer.  "  The  con- 
sumer is  king." 

The  great  industrial  revolution  in  England  came  from 
transferring  thought,  skill,  and  intelligence  to  machines. 
The  superior  knowledge  of  tlie  individual  could  thus  be 
reproduced  thousands  of  times.  His  mental  capacity  em- 
bodied in  iron  and  steel  could  work  day  and  night  without 
weariness.  The  results  of  this  transferring  of  human 
capacity  to  inanimate  objects  have  been  one  of  the  great 


IxNTERPRETATION  OF  BUSINESS  FACTS      297 

wonders  of  modern  times.  Possibly  something  of  this 
same  kind  can  be  done  in  the  commercial  world  by  the 
use  of  statistical  methods.  At  present,  however,  such 
methods  can  by  no  means  supplanit  the  business  manager. 
He  can  divest  his  mind  of  the  great  burden  of  carrying 
the  countless  details  of  business,  but  he  is  thus  only  clear- 
ing the  decks  for  better  thinking.  Clear,  intelligent,  far- 
sighted,  careful  thinking  is  to-day  at  a  premium  as  never 
before.  In  this  new  revolution  of  commerce,  statistical 
methods  may  play  an  important  role,  but  as  far  as  may 
be  seen  to-day  they  are  no  more  than  a  mere  vehicle  of  ex- 
pression and  are  only  as  valuable  as  the  data  which  they 
carr3\ 

Superiority  of  Tables.  Of  all  the  statistical  methods 
that  have  passed  in  survey,  in  this  discussion,  the  one  that 
will  probably  prove  best  for  all-round  serviceability  is 
the  tables.  In  the  first  place,  these  show  the  facts.  If 
they  have  been  properly  constructed  they  also  carry  with 
them  the  means  of  checking  up  these  facts.  And  again 
they  make  details  easily  available  at  the  same  time  that 
they  carry  convenient  summaries  and  the  concentration 
figures.  Very  often  the  tables  present  the  results  of  com- 
parisons in  their  percentage  columns.  They  thus  enable 
one  to  make  comparisons  of  comparisons  with  relative 
ease. 

These  tables,  however,  to  be  of  such  superior  service 
must  be  well  made.  This  means  that  the  material  which 
they  carry  will  have  been  carefully  collected,  thoroughly 
analyzed,  and  scientifically  classified.  It  means,  also,  that 
all  kinds  and  varieties  of  data  have  been  reduced  to  some 
common  principle  which  in  its  turn  can  directly  be  trans- 
lated into  the  terms  of  the  immediate  business  problem. 
"  Classification  is  a  prerequisite  for  discrimination,  and 


298  COMMERCIAL  RESEARCH 

discrimination  is  essential  to  scientific  study."  (Secrist, 
"  Introduction  to  Statistical  Methods,"  p.  125.) 

On  inspecting  a  statistical  table,  there  is  not  only  the 
accuracy  of  the  details  of  fact,  the  summaries,  and  the 
mechanical  construction  of  the  table  to  be  scrutinized,  but 
there  is  also  need  of  observing  with  care  the  column  ar- 
ranged to  take  care  of  the  unclassifiable  material.  Almost 
every  table  will  have  a  catchall  for  miscellaneous  or  un- 
classified data.  This  column  needs  watching.  It  may 
be  that  some  very  essential  facts  will  have  been  thrown  into 
this  scrap  heap.  The  size  of  these  miscellaneous  items 
and  their  importance  and  the  reason  why  they  have  not 
been  classified  are  all  matters  for  inquiry. 

There  is  also  the  integrity  of  the  table  which  is  to  be 
tested.  A  great  French  scholar  once  pointed  out  the 
fact  that  in  these  days  of  highly  specialized  research  it 
becomes  impossible  for  the  average  man  to  check  up  the 
details  of  the  numberless  investigations  that  are  being  car- 
ried on.  Confidence,  therefore,  is  necessary  in  the  in- 
tegrity of  investigators.  There  is  need  of  what  he  very 
cleverly  called  a  "  scholarly  conscience  "  in  the  matter  of 
research  work.  The  same  principles  hold  true  in  com- 
mercial investigation.  No  artistic  skill  in  line  or  figure 
can  or  should  possibly  take  the  place  of  classification  and 
clear  analysis.  Inspection  of  statistical  tables  should 
bring  them  to  this  crucial  test. 

Conclusion.  When  the  mind  of  the  executive  consents 
to  a  conclusion  that  has  been  reached,  the  die  is  cast. 
The  process  of  research  is  then  complete.  Investigation 
has  done  its  work.  What  remains  from  this  moment  for- 
ward is  an  administrative  task.  The  problem  then  passes 
beyond  the  bounds  of  research. 

This  means,  in  other  words,  that  business   facts  have 


INTERPRETATION  OF  BUSINESS  FACTS      299 

been  translated  into  business  policy.  The  conclusion  be- 
comes a  rule  of  action.  When  the  results  are  affirmed  by 
the  judgment  of  the  business  manager,  there  will  follow 
all  the  financial  and  legal  responsibilities  that  exist  in  all 
methods  of  carrying  on  business.  Just  as  the  goal  of  all 
statistical  analysis  is  the  comparison  of  data,  so  the  goal 
of  all  business  research  is  an  acceptable  conclusion  for  a 
business  policy. 


CHAPTER  X 

ORGANIZATION    FOR    RESEARCH 

Research  work  as  incidental  —  Research  department  —  Trade  asso- 
ciations—  The  advertising  agency  —  The  auditing  firm  —  Business-re- 
search companies  —  The  organization  necessary  —  Training  of  the  in- 
vestigator —  Equipment  for  research  work  —  Conclusion. 

In  order  to  carry  on  any  definite  line  of  business  activ- 
ity, it  is  practically  necessary  to  have  some  sort  of 
organization  especially  constructed  to  meet  its  needs.  It 
has  often  been  said  that  all  types  of  business  organiza- 
tion rise  to  meet  new  demands.  Tliis  has  been  one  basis 
on  which  the  rise  of  new  middlemen  has  been  explained. 
There  was  a  time  when  the  business  man  was  a  manu- 
facturer, a  merchant,  a  warehouse  man,  a  financier,  a 
wholesaler,  and  a  retailer  combined.  But  compared  to 
the  modern  complex  business  that  was  a  simple  and  prim- 
itive type  of  organization.  It  is  always  necessary  to  have 
new  types  to  fit  new  conditions,  and,  just  as  it  is  a  serious 
problem  to  select  the  proper  channels  of  distribution  for 
one's  product,  so  here  in  the  matter  of  research  it  is  ex- 
tremely important  that  an  organization  well  suited  to  this 
type  of  work  should  be  made. 

There  are  several  possibilities  from  which  the  business 
manager  may  make  his  choice : 

(1)  An  individual  may  be  selected  from  the  working 
force  who  seems  to  have  a  "  bent  for  figures  "  to  take  on 
the  extra  work  of  investigation.  He  is  the  one  to  whom 
all  matters   of   this   sort   are   referred ;   incidental   to   his 

300 


ORGANIZATION  FOR  RESEARCH         301 

regular  duties  he  collects  what  facts  he  may  and  analyzes 
them  as  best  he  can.  Sometimes  this  work  is  subordi- 
nated so  much  as  to  make  it  a  part  of  the  duty  of  the 
sales  manager  or  the  purchasing  agent  or  accountant. 

(2)  A  separate  department  may  be  organized  within 
the  establishment.  This  research  department  may  be  in 
charge  of  a  manager,  alone  or  with  assistants.  This 
stage  of  development  marks  the  true  realization  of  the 
value  of  research  work. 

(3)  The  business  manager  may  work  in  cooperation 
with  one  or  more  trade  associations  who  have  an  edu- 
cational department  for  research  investigation.  This 
method  of  cooperation  has  many  things  in  its  favor. 

(4)  The  business  man  may  call  in  the  services  of  an 
advertising  agency.  This  type  of  institution  is  more  and 
more  emphasizing  the  research  phases  of  its  business. 

(5)  There  is  also  the  auditing  firm,  or  the  firm  of 
expert  accountants,  who,  like  the  advertising  agency,  is 
turning  more  and  more  to  this  work  of  investigation. 

(6)  There  are  the  more  highly  specialized  business  re- 
search and  development  companies.  This  kind  of  organ- 
ization represents  the  most  modern  type  of  functional- 
ized  middlemen.  Which  of  these  various  kinds  of  organ- 
izations shall  be  used  in  any  individual  case  is  a  practical 
question. 

Research  Work  as  Incidental.  It  has  always  been 
necessary  for  any  progressive  manufacturer  or  merchant 
to  make  some  kind  of  study  of  his  business.  In  the  small 
organization  and  in  the  early  development  of  wholesale 
and  retail  organization  this  work  generally  fell  to  the  lot 
of  the  manager.  He  was  supposed  to  supply  the  brain- 
work  for  the  entire  business,  and  as  best  he  could  he  se- 
cured a  basis  in  fact  for  his  judgment.     When  the  emer- 


302  COMMERCIAL  RESEARCH 

gency  arose  he  would  seek  from  all  sources  available  the 
best  facts  to  be  found  and  analyze  these  under  the  pres- 
sure of  an  immediate  need.  Sometimes  this  kind  of  work 
was  given  over  to  a  man  in  the  organization  whose  bent 
of  mind  led  him  to  careful  and  systematic  study.  There 
are  people  to  whom  it  seems  a  matter  of  second  nature  to 
put  down  general  observations  and  experiences  in  syste- 
matic form.  But  in  all  cases  of  this  kind  the  investigator 
was  a  chance  man  and  never  especially  trained  for  the 
work.  At  one  time  it  might  be  some  one  in  the  purchas- 
ing end  of  the  business ;  or,  again,  facts  were  sought  from 
the  sales  organization ;  but  usually  the  victim  in  a  case  of 
this  kind  was  the  bookkeeper  or  accountant.  He  was  pre- 
sumed to  be  able  to  "  dish  up  "  the  proper  kind  of  data 
on  demand.  It  was  necessary  for  such  investigations  to 
pass  away  before  a  more  efl5cient  type  of  research  could 
be  made. 

Under  incidental  investigations  the  work  is  usually 
choppy,  disjointed,  and  almost  never  carried  on  to  the 
point  of  reaching  reliable  results.  With  an  organization 
of  this  kind,  also,  it  was  never  possible  to  have  the  real 
equipment  for  research  or  the  necessary  training  or  even 
the  leisure  time  and  ample  opportunity  for  careful  and 
systematic  work.  In  other  words,  all  parts  of  the  in- 
vestigation were  incidental.  It  was  a  work  of  mere  ex- 
pediency. Research  was  a  by-product  of  the  real  day's 
job. 

Where  a  business  is  small  and  the  organization  is  sim- 
ple, it  may  still  be  a  wise  thing  to  make  the  investigation 
of  business  an  incidental  part  of  a  day's  work.  It  may 
even  be  necessary  for  the  manager  to  carry  the  burden  of 
securing  the  required  information  for  the  business  policy 
or  the  rule  of  action.     To  aid  a  manager  in  this  situation 


ORGANIZATION  FOR  RESEARCH  303 

who  is  already  hard  pressed  with  the  many  details  of 
business,  there  are  the  various  simple  devices  for  filing, 
analyzing,  and  summarizing  business  facts.  Even  a 
meager  equipment  of  filing  cases  and  of  charts  or  maps 
would  greatly  aid  in  carrying  on  the  needed  research 
work.  With  insufficient  equipment  of  this  kind,  but  with 
a  clear  understanding  and  a  full  appreciation  of  the  value 
of  research  on  the  part  of  the  manager,  it  would  be  pos- 
sible for  him  to  train  up  his  working  force  to  be  of  great 
assistance  to  him  in  this  matter.  In  case  of  a  problem 
of  great  importance,  it  will  usually  be  the  wisest  policy, 
however,  for  such  a  business  manager  to  seek  the  really 
expert  advice  of  some  specialized  investigator. 

Research  Department.  When  the  importance  of  re- 
search work  becomes  clearly  recognized,  there  may  be 
devoted  to  it  a  special  department  that  becomes  a  distinct 
part  of  the  business  organization.  This  will  mean  a  type 
of  specialized  activity  where  a  new  function  has  been 
isolated.  Not  long  ago  the  advertising  manager  was  un- 
certain as  to  his  position  in  the  organization  of  a  busi- 
ness. Even  to-day  in  many  concerns  the  question  of  the 
scope  of  his  authority  has  not  been  fully  answered.  This 
will  likely  also  be  the  experience  in  regard  to  research 
work. 

There  are  recognized  to-day  four  distinct  types  of  so- 
called  functional  managers:  (1)  the  production  manager, 
whose  duty  it  is  to  supervise  the  work  of  manufacturing 
with  all  its  subordinate  details;  (2)  the  financial  manager, 
who  is  the  modern  type  of  the  old  treasurer;  (3)  the  sales 
manager,  whose  duties  are  clearly  indicated  by  his  title, 
and  (4)  the  administrator.  This  individual  has  for  his 
immediate  task  the  bringing  together  of  all  factors  within 
the  business  so  that  they  may  work  together  consistently 


S04  COMMERCIAL  RESEARCH 

and  harmoniously  for  a  common  purpose.  A  part  of  the 
duty  of  the  administrator  is  to  organize  the  office  force 
and  to  be  responsible  for  what  has  been  called  the  "  facili- 
tating agencies  "  of  a  business.  In  smaller  concerns  these 
four  types  are  not  often  clearly  defined.  Some  or  all 
of  them  may  be  combined  in  one  individual.  Where  these 
managers  have  been  recognized  the  work  of  the  research 
department  would  be  hard  to  place.  It  would  certainly 
be  subject  to  the  administrator,  because  it  is  a  part  of 
the  concentration  of  business  data.  Research  work  might 
possibly  be  under  the  direct  supervision  of  the  sales  man- 
ager, because  he  first  of  all  feels  the  need  of  the  facts 
which  the  research  department  must  gather.  And  yet 
each  manager  is  in  need  of  more  knowledge  and  must  use 
the  research  department  to  its  fullest  advantage.  The 
cardinal  principle  in  research  work  is  cooperation. 

The  types  of  organization  will,  no  doubt,  be  influenced 
by  the  personality  of  those  in  charge.  One  type  might 
work  more  successfully  in  a  given  concern  than  another. 
No  sure  place  for  the  research  department  can  be  deter- 
mined and  probably  none  is  necessary.  Since,  however, 
the  data  from  this  department  must  finally  come  to  the 
administrator  or  to  the  general  manager,  it  will  be  neces- 
sary for  that  department  to  keep  in  direct  touch  with  it. 
It  would  not  be  illogical,  for  instance,  for  the  research 
department  to  be  connected  directly  with  the  office  of  the 
administrator.  A  suggested  type  of  business  organiza- 
tion which  includes  the  research  department  is  given  on 
opposite  page. 

In  a  mercantile  establishment  the  production  manager 
becomes  the  purchasing  agent.  Otherwise  the  type  of 
organization  need  not  be  greatly  changed.  It  is  prob- 
ably  true,  however,  that  the  sales   manager   becomes   of 


ORGANIZATION  FOR  RESEARCH 


305 


Administrator 


Production 
/Manager 


Sales 
Manaa&r 


ReaearcA 
Departm  ent 


Advertising 
M^anager 


Fig.  XII 

dominating  importance  in  this  kind  of  business.  The 
need  for  a  knowledge  of  facts  is,  of  course,  common  to  all 
kinds  of  organizations.  There  should  also  be  the  same 
sort  of  cordial  cooperation.  No  research  department  can 
attain  its  highest  success  unless  a  constant  stream  of  raw 
material  in  the  form  of  business  facts  pours  into  it  from 
all  sources  —  this  means  from  every  department  of  the 
business  as  well  as  from  independent  study  and  analysis. 
The  research  department  should  be  a  kind  of  laboratory 
for  the  business  concern. 

It  has  been  said  that  a  research  department  may  appear 
in  all  types  of  organizations.  It  is  also  true  that  a  re- 
search department  may  appear  in  all  kinds  of  business. 
There  have  been  established  research  departments,  for  ex- 
ample, for  research  work  of  general  educational  character. 
They  have  become  a  part  of  the  splendid  work  carried  on 
by  the  large  trade  associations  of  the  country.  Sometimes 
they  appear  in  the  form  of  a  distinct  department  organized 
after  the  manner  of  other  departments  ;  sometimes  they  ap- 
pear merely  as  a  part  of  the  duty  of  the  secretary  of 
these  trade  associations.     In  this  case,  however,  the  only 


306  COMMERCIAL  RESEARCH 

difference  is  that  the  outlook  is  broader,  the  scope  of  the 
analysis  more  inclusive.  A  more  detailed  discussion  of 
the  research  department  as  it  appears  in  trade  associa- 
tions will  be  given  later. 

Sound  business  policies  are  essential  for  long-distance 
selling  where  a  guarantee  is  given  as  in  the  case  of  the 
large  mail-order  houses.  One  of  the  largest  mail-order 
houses  in  the  country  has  a  well-organized  laboratory  for 
physical  and  chemical  analysis  of  the  commodities  which 
it  handles.  Working  along  with  this  laboratory  force 
there  is  a  group  called  the  "  good-service  department  " 
which  checks  up  the  stock  by  the  description  in  the  cata- 
logues, and  where  there  is  room  for  doubt  as  to  the 
accuracy,  commodities  are  carried  to  the  laboratory  for 
analysis.  In  this  way  the  analytical  tests  are  at  once 
brought  into  use  in  the  control  of  the  business.  Some  of 
these  large  mail-order  establishments  are  likewise  train- 
ing their  own  force  to  aid  them  in  gaining  facts  for  a 
more  efficient  method  of  carrying  on  business.  In  one, 
for  instance,  there  is  a  constantly  open  offer  to  any  mem- 
ber of  the  working  force  that  demonstrates  an  error  in 
the  catalogue.  In  addition  to  this,  these  large  establish- 
ments have  expert  investigators  in  the  field  who  keep  con- 
stantly in  touch  with  consumer  conditions.  They  get 
the  news  about  the  crops  in  the  various  parts  of  the  coun- 
try as  reliably  and  more  quickly  than  the  government. 
By  this  means  the  house  is  able  to  adjust  its  sales  policy 
to  financial  and  trade  conditions  throughout  its  wide 
market. 

In  addition  to  these  types  of  research  departments  there 
is  another  where  expert  knowledge  is  sought  for  the  pur- 
pose of  gaining  good  will  or  affording  service  to  the 
patrons   of  certain  establishments.      This   type  is   repre- 


ORGANIZATION  FOR  RESEARCH         307 

sented  by  the  merchandising  bureaus  that  are  being  organ- 
ized throughout  the  country  by  daily  newspapers  and 
periodicals.  In  New  York,  Boston,  Philadelphia,  and 
Chicago  there  are  many  daily  papers  that  have  made 
investigations  of  their  local  markets  and  have  these  data 
on  file  for  their  own  use  in  demonstrating  to  advertisers 
the  value  of  their  columns.  In  smaller  cities,  like  In- 
dianapolis and  Seattle,  the  daily  papers  are  imitating 
those  of  the  larger  centers.  Very  interesting  data  are 
being  gathered  by  these  bureaus  and  oftentimes  careful 
and  admirable  work  is  done  by  them.  In  most  cases  this 
work  is  in  charge  of  a  separately  organized  department. 
Many  magazines  have  done  work  of  the  same  sort.  A 
conspicuous  example  is  the  Curtis  Publishing  Company 
which  has  already  been  mentioned.  There  is,  here,  a  defi- 
nite organization  for  research  work  in  the  control  and 
under  the  supervision  of  the  advertising  manager. 

Other  types  of  institutions  likewise  find  it  advantageous 
to  seek  good  will  through  the  same  medium.  Some  of  the 
larger  banks  throughout  the  country  have  established  sta- 
tistical and  research  departments,  especially  for  the  study 
of  problems  connected  with  certain  commodities  and  for 
the  study  of  all  new  commercial  and  industrial  develop- 
ments. Much  good  work  has  been  done  by  some  of  these 
institutions  in  discussing  the  merits  of  the  trade  accept- 
ance. From  time  to  time  pamphlets  are  published  and 
distributed  free  of  charge  by  these  banks  to  all  their  pa- 
trons, and  to  those  outside  who  might  be  interested  in 
the  subject  discussed.  Grain  brokers,  stockbrokers,  and 
others  who  deal  in  stocks  and  bonds  have  called  to  their 
aid  statistical  experts  for  the  securing  and  analyzing  of 
essential  facts.  Frequently  in  these  institutions,  also, 
there  is  a  distinct  research  department. 


308  COMMERCIAL  RESEARCH 

Trade  Associations.  The  work  done  in  business  re- 
search by  the  large  trade  associations  needs  special  em- 
phasis. As  has  been  said,  these  associations  mark  the 
new  phase  in  the  development  of  business  relations.  They 
are  a  very  great  educational  factor  in  the  life  of  the 
business  man,  because  they  furnish  him  a  means  of  get- 
ting a  new  point  of  view.  A  merchant  almost  inevitably 
forms  a  different  judgment  of  his  competitor  when  he 
meets  that  competitor  as  one  among  many  good  fellows 
at  an  annual  conference  where  they  discuss  freely  and 
openly  their  common  problems.  Most  of  these  organiza- 
tions have  as  one  of  their  definitely  stated  aims  a  fuller 
knowledge  of  their  business ;  men  gather  from  time  to 
time  from  all  parts  of  the  country  and  thus  bring  all 
their  varied  experiences  for  the  solving  of  their  various 
problems.  The  leaders  in  the  development  of  these  asso- 
ciations were  quick  to  see  the  need  for  research  work  in 
order  that  the  education  of  their  members  might  be  more 
rapid. 

As  an  evidence  of  the  work  done  along  the  line  of  re- 
search, the  following  items  were  taken  from  an  address 
at  an  annual  conference  of  the  National  Association  of 
Credit  Men  for  1917.  The  Des  Moines  Association  of 
Credit  Men  ha«s  appealed  to  the  retailers  of  that  city  in 
order  to  awaken  them  to  the  realization  of  the  need  for 
better  business  methods.  The  same  is  true  of  the  Retail 
Grocers'  Association  of  New  Orleans.  The  Boston  Credit 
Men's  Association  recently  distributed  75,000  cards,  en- 
titled, "  Why  Men  Fail  in  Business."  The  Peoria  Asso- 
ciation of  Credit  Men  printed  and  circulated  a  small 
pamphlet  for  the  purpose  of  telling  retailers  that  "  A 
successful  business  requires  a  clean  stock,  turned  fre- 
quently ;  careful  crediting  and  close  collections ;  econom- 


ORGANIZATION  FOR  RESEARCH         309 

ical  expcD'Ses ;  a  fair  percentage  of  profit,  and  finally  to 
take  a  complete  inventory  January  1,  1917."  The  Wis- 
consin Retail  Lumberman's  Association  has  urged  upon 
its  members  the  use  of  a  simple  but  comprehensive  cost- 
accounting  system.  The  National  Retail  Hardware  As- 
sociation has  been  studying  the  accounting  needs  of  the 
retailer  in  hardware  trade.  The  National  Association 
of  Retail  Grocers  recently  issued  a  pamphlet  entitled 
*'  How  the  Retail  Grocer  may  Better  Know  his  Busi- 
ness." The  National  Retail  Dry  Goods  Association  has 
submitted  a  report  in  two  volumes  entitled  the  "  Classifi- 
cation and  Distribution  of  Expense  in  Retail  Stores." 
The  National  Implement  and  Vehicle  Association  has  been 
working  for  more  than  ten  3'ears  to  educate  the  retailers 
in  better  business  methods.  The  National  Association  of 
Wholesale  Clothiers  and  of  Retail  Clothiers  have  ap- 
pointed a  committee  called  the  Joint  Committee  of  Whole- 
salers and  Retailers.  One  of  the  main  purposes  of  this 
committee  is  to  discuss  the  common  problems  in  their  par- 
ticular line  of  trade. 

On  a  broader  scale  than  this,  other  associations  have 
been  taking  up  the  work  of  research.  The  Associated 
Advertising  Clubs  of  America  has  organized  a  retail  serv- 
ice and  business  system  department.  The  aim  of  this 
department  is  to  carry  better  business  methods  directly 
to  the  retailer  and  to  demonstrate  how  they  may  be  made 
operative.  Certain  trained  men,  called  field  men,  are  to 
visit  the  retail  merchants  and  consult  with  them  regard- 
ing every  phase  of  retail  management.  The  National 
Wholesale  Dry  Goods  Association  likewise  has  appointed 
a  special  committee  that  was  instrumental  in  creating 
what  is  known  as  the  National  Mercantile  Educational 
Association.     "  The    sole    aim    of   this    association    is    to 


310  COMMERCIAL  RESEARCH 

solicit  and  coordinate  the  various  efforts  that  are  being 
put  forth  in  the  United  States  at  the  present  time." 
There  is  also  the  Chamber  of  Commerce  of  the  United 
States  which  has  in  mind  to  form  a  retail-service  bureau, 
"  to  conduct  a  nation-wide  research,  analj'ze  retail  mer- 
chandising, and  place  at  the  disposal  of  all  retailers  the 
results  of  all  investigations  together  with  recommenda- 
tions, standardized  methods,  and  so  on,"  This  powerful 
organization  can  work,  of  course,  through  the  various 
local  chambers  of  commerce  for  carrying  on  this  investi- 
gation. 

This  type  of  organization  has  been  a  new  development 
in  business,  and  has  shown  many  chances  for  bringing 
business  men  together  for  mutual  helpfulness.  The  un- 
derlying spirit  in  most  of  the  trade  organizations  is  that 
of  cooperation.  This  is  the  same  spirit  which  lies  be- 
hind all  successful  research  work.  There  will  be  no  great 
difficulty,  therefore,  in  making  trade  associations  a  splen- 
did vehicle  for  research  that  may  be  readil}'  adapted  to 
any  one's  needs.  Already  much  confidence  has  been  es- 
tablished by  means  of  conferences  that  are  held  from  year 
to  year  by  trade  associations  and  the  old-time  distrust 
which  one  merchant  felt  for  a  competitor  is  rapidly  dis- 
appearing. A  better  realization  of  mutual  interests  has 
already  come. 

In  most  cases  the  trade  organization  is  largely  con- 
trolled by  the  secretary.  All  new  work  is  developed  by 
him  and  therefore  his  attitude  will  determine  the  extent 
of  all  educational  movements.  Many  of  these  men  have 
already  realized  the  significance  of  commercial  research 
and  several  are  now  making  their  offices  the  clearing  houses 
of  valuable  information.  Certain  associations  have  sec- 
retaries that  send  out  daily  news  bulletins  for  the  pur- 


ORGANIZATION  FOR  RESEARCH  311 

pose  of  keeping  the  members  who  are  interested  in  touch 
with  all  new  developments  that  may  affect  their  business. 

The  Advertising  Agency.  Originally  the  advertising 
agency  was  merely  a  broker  in  space.  For  a  number  of 
years  tliese  agencies  devoted  their  entire  efforts  to  selling 
advertising  space  in  newspapers  and  magazines  and  on 
billboards  for  a  stipulated  commission.  This  work  still 
continues,  but  is  growing  less  important  year  by  year. 
The  agencies  are  turning  their  attention  more  and  more 
to  trade  investigations.  They  are  finding  that  they  must 
give  sound  business  advice  to  their  patrons  on  various 
subjects,  and  in  order  to  be  in  a  position  to  give  such 
advice,  it  becomes  necessary  for  them  to  know  the  facts. 
"  The  good  advertising  agent  is  a  high-grade  business 
adviser.  .  .  .  He  offers  the  customers  ideas  and  prac- 
tical aid,  born  of  experience,  together  with  a  real  concern 
as  to  the  customer's  success.  .  .  .  Advertising  is  to-day 
but  one  feature  of  the  work  of  a  real  agency."  ("  Selling 
Forces,"  pp.  68-70.) 

It  has  become  necessary  for  advertising  men  to  know 
more  about  the  real  business  of  production  and  of  sales- 
manship. Many  advertising  experts  have  long  claimed 
that  advertising  is  only  a  special  kind  of  salesmanship 
and  that,  therefore,  if  they  knew  advertising,  they  knew 
all  that  was  required  of  them.  Experience  has  demon- 
strated, however,  that  the  good  advertising  agent  must 
combine,  either  in  a  single  individual  or  in  an  organization, 
and  in  these  later  days  it  is  usually  the  latter,  the  quali- 
ties of  a  good  business  adviser,  of  a  salesman,  of  a  suc- 
cessful manufacturer,  and  some  skill  as  an  artist  and 
writer.  (Cf.  "Selling  Forces,"  p.  78.)  "These  men 
are  students  of  commerce,  of  economics,  of  distribution, 
and  trade  conditions ;  they  are  alive  to  financial  condi- 


312  COMMERCIAL  RESEARCH 

tions  in  practically  all  divisions  of  business.  They  know 
about  exports  and  imports ;  they  have  studied  commercial 
law,  and  together  they  represent  a  fund  of  business  in- 
formation such  as  no  one  man  could  get  and  such  as  no 
business  man  could  hire  outside  of  an  institution  of  this 
character."      (Printer's  Ink,  July  20,  1911,  p.  132.) 

It  is  predicted  also  that  agencies  of  this  sort  will  turn 
more  and  more  in  the  future  to  the  work  of  commercial 
research.  The  writing  of  the  copy,  the  artistic  work  on 
the  advertisement  itself  will  become  only  the  crowning 
effort  of  a  long  course  of  study  and  investigation.  "  I 
will  venture  the  prediction,"  says  one  advertising  man- 
ager, "  that  five  years  from  now  no  advertising  agency 
handling  national  business  will  be  complete  without  a 
staff  of  commercial  salesmen  and  investigators,  stronger 
in  sales  ability  and  trade  investigation  than  in  writing 
copy,  outlining  a  campaign,  or  getting  a  new  client." 
(Printer's  Ink,  May  25,  1910,  p.  9.) 

A  typical  example  of  the  organization  of  an  advertising 
agency  is  illustrated  by  the  following  chart. 

It  will  be  noted  from  this  illustration  that  only  one 
part  of  the  agency's  organization  is  devoted  to  investiga- 
tive work.  In  this  particular  case  this  department  is 
called  "  contact  "  and  has  two  subdivisions,  one  for  plans 
and  one  for  selling.  Under  another  division  called  "  pro- 
duction," there  is  one  department  that  is  entitled  "  sta- 
tistical." It  is  probable  that  in  this  case  the  investiga- 
tive work  is  performed  by  these  three  departments.  There 
is  no  doubt,  however,  that  the  experience  of  this  particu- 
lar advertising  agency  has  shown  that  these  three  depart- 
ments really  lay  the  foundation  for  all  their  advertising 
success. 

There  are  many  such  advertising  agencies  throughout 


ADVERTISING  AGENCY 


r-^  Financial  • 


'Credits 


—Bookkeeping 
— Billing 
^—Collecting 


Contact- 


t 


■Plans 
Selling 


'J^oduction.' 


Executive  — 
Manager 
or  OwTier 


•Statistical 


—Copy  writing 

— Layouts 

—Art  work 

^~Mec}tanical  ~r~7ypeseiiing 

—Elecb-Qiyping 

—Half  tones 

—Lithography 

—Pliotographs 

^Colot  Printing 


Orders 


'  Registration 
'Forwarding 
-Checking 


Fio.  XIII 
313 


314  COMMERCIAL  RESEARCH 

the  country.  The  individual  manufacturer  or  merchant 
will  find  at  hand  a  reliable  firm  ready  to  devote  its 
trained  and  organized  force  to  the  solution  of  any  prob- 
lem that  has  arisen.  Up  to  this  time,  however,  these 
agencies  have  paid  most  attention  to  the  extension  of 
the  market  for  the  commodity  under  consideration.  The 
tendencj^  seems  to  be  for  the  work  to  broaden  in  scope 
until  the  agency  examines  all  parts  of  the  business  thor- 
oughly enough  to  determine  whether  there  should  be  an 
additional  advertising  expense  or  whether  the  advertis- 
ing should  actually  be  cut  down.  Many  agencies  boast 
of  the  fact  that  they  advise  their  clients  not  to  advertise. 
Several  large  manufacturers  and  merchants  employ  these 
agencies  even  though  they  themselves  have  an  organized 
research  department.  In  any  case  it  is  evident  that  here 
at  hand  is  the  machinery  for  trade  investigation  when- 
ever it  is  wanted. 

The  Auditing  Firms.  Along  with  many  other  busi- 
ness changes  there  is  developing  to-day  a  new  conception 
of  accounting.  Some  years  ago  this  subject  was  con- 
fined to  simple  methods  of  bookkeeping,  by  the  single  or 
double-entry  system.  The  scope  of  work  here,  however, 
has  broadened  continually  until  to-day  there  is  sought  a 
body  of  principles  whicli  may  be  applied  not  only  to  all 
accounting  problems,  but  also  may  include  nearly  all 
the  statistical  work  done  by  the  business  manager.  This 
change  has  really  been  from  a  mere  record  to  avoid  mis- 
takes, which  was  the  primary  purpose  of  the  old-time 
bookkeeping,  to  a  highly  developed  organization  for  busi- 
ness control.  This  fact  accounts  for  the  remarkable 
development  of  cost  accounting.  It  is  clear,  of  course, 
that  a  careful  study  of  costs  is  a  fundamental  necessity 
in  the  more  intelligent  management  of  a  business. 


ORGANIZATION  FOR  RESEARCH         315 

Many  expert  accountants  have  already  seen  the  hand- 
writing on  the  wall.  They  have  learned  that  they  must  be 
able  to  do  more  than  merely  to  find  errors  in  the  books. 
They  must  rise  beyond  the  rank  of  mere  business  plumb- 
ers, thumbing  through  old  and  musty  ledgers  for  the  old, 
forgotten  error  and  the  minor  mistakes  in  addition  and 
subtraction.  Like  the  advertising  agencies,  the  expert 
accountant  of  to-day  is  becoming  a  business  adviser.  The 
reports  of  an  audit  company  will  frequently  carry  a 
broad  survey  of  the  business  and  will  conclude  with  recom- 
mendations leading  toward  a  better  and  more  intelligent 
control.  In  other  words,  the  auditing  companies,  like  the 
research  department  and  the  advertising  agency,  are  work- 
ing for  the  business  manager  in  a  new  sense.  So  skillful 
have  many  of  these  expert  accountants  become  that  they 
can  reproduce  from  the  records  of  the  books  the  entire 
past  of  a  given  business,  in  such  a  way  as  to  show  mistakes 
in  judgment,  errors  in  management,  and  to  point  the  way 
to  sounder  business  policy.  These  men  are  in  an  advan- 
tageous position  of  knowing  the  facts,  so  far  as  the  rec- 
ords go,  at  first  hand. 

These  companies,  also,  are  reaching  out  for  other  knowl- 
edge than  they  sought  in  the  past.  They  are  asking  to- 
day what  use  can  be  made  of  accounts,  particularly  for 
business  control.  It  has  already  been  shown  in  this  dis- 
cussion that  the  material  which  the  accountant  uses  is  a 
most  valuable  source  of  business  data.  The  full  appre- 
ciation of  this  has  not  yet  come,  but  many  men  are  be- 
ginning to  understand  the  value  of  these  facts.  The 
accountant  sees  that  if  he  has  the  capacity  to  use  the 
facts  which  come  to  his  hand  he  may  become  an  expert 
business  investigator.  Much  of  his  training  to-day  is. 
for  that  purpose. 


316  COMMERCIAL  RESEARCH 

The  result  of  this  new  movement  among  the  accountants 
may  appear  in  the  reconstruction  of  accounting  systems. 
When  one  understands  that  business  records  of  the  past 
are  not  useless,  when  one  sees  that  they  may  be  made  to 
live  again  by  using  them  for  more  intelligent  control,  it  is 
likely  that  they  will  be  treated  in  a  far  different  way. 
Like  the  work  of  the  advertising  agency,  this  work  of  the 
expert  accountant  grows  broader  from  year  to  year. 
There  is,  for  instance,  the  discussion  of  budget-making  for 
a  business  as  well  as  for  state  and  country,  and  this  work, 
too,  is  for  the  purpose  of  more  intelligent  business  con- 
trol. 

The  merchant  or  the  manufacturer  may  call  in  the  ex- 
pert accountant  to  examine  his  records  and  he  may  gain 
from  this  business  expert  much  sound  advice  to  help  him 
in  the  future.  More  and  more  the  merchant  and  the  manu- 
facturer are  asking  of  the  expert  accountant  that  he  shall 
know  more  than  the  figures.  To-day  he  must  understand 
the  principles  lying  behind  those  records.  The  business 
man  on  his  part  is  increasing  in  his  appreciation  of  the 
value  of  this  kind  of  expert.  Frequently  the  organization 
that  has  a  research  department  of  its  own  asks  an  audit- 
ing firm  to  come  in  and  check  up  on  its  records  in  order 
that  it  may  have  a  new  point  of  view. 

Business  Research  Companies.  To  meet  this  new  de- 
mand for  broader  business  knowledge,  there  has  come  into 
existence  in  recent  years  a  new  type  of  organization. 
This  is  the  business  research  company.  The  definite  aim 
of  such  an  organization  is  to  seek  the  pertinent  and  essen- 
tial facts  connected  with  any  given  business.  Many  of 
them  claim  that  they  are  prepared  to  carry  on  an  investi- 
gation in  such  a  way  as  to  show  where  the  weaknesses  are 
and  how  these  may  be  strengthened.     They  claim  to  be 


ORGANIZATION  FOR  RESEARCH         31T 

able  to  afford  to  the  business  manager  a  broader  basis  in 
fact  for  his  decisions.  Their  work,  it  is  claimed,  underlies 
the  work  of  the  advertiser.  It  is  more  fundamental;  it  is 
the  first  necessary  step. 

It  is  no  doubt  true  that  such  companies,  when  well 
equipped  for  their  business,  can  offer  the  manager  a  far 
broader  view  than  he  can  gain  by  his  own  study.  In  the 
first  place,  they  are  wholly  impersonal  in  their  attitude. 
The  investigation  becomes  for  them  a  problem  to  be  solved, 
just  as  the  scientist  takes  his  problem  into  the  laboratory 
for  solution.  The  essential  factors  are  isolated  quite 
apart  from  the  individual  business  interest.  This  enables 
such  a  research  company  to  give  the  manager  a  new  point 
of  view. 

Many  organizations  of  this  kind  are  equipped  to  make 
both  a  local  survey  and  a  national  investigation.  They 
will  carry  on  this  work  either  by  mail  or  through  the 
medium  of  personal  investigators.  It  is  also  clear  that 
the  efficiency  of  such  a  research  company  constantly  in- 
creases with  its  increase  in  experience  just  as  a  physician 
grows  better  with  his  years  of  practice.  Data  will  ac- 
cumulate for  it  year  by  year  and  will  enable  it  to  apply 
tests  such  as  the  individual  business  man  cannot  make. 
Such  work  is  still  new,  but  is  making  rapid  progress  in 
the  larger  business  centers.  The  future  for  these  research 
companies  is  very  bright.  When  they  are  well  equipped 
with  a  trained  force  for  business  investigation,  they  will 
become  a  strong  factor  for  more  intelligent  business  con- 
trol. 

There  have  been  for  several  years  a  number  of  com- 
panies of  this  character  who  claim  to  be  business  prophets. 
They  work  out  from  time  to  time  what  they  call  a  busi- 
ness barometer,  by  means  of  which  the  manager  may  an- 


318  COMMERCIAL  RESEARCH 

ticipate  trade  conditions.  Some  of  these  companies  con- 
struct index  numbers  for  the  purpose  of  showing  the 
business  trend.  Others  collect  from  numerous  sources  in- 
teresting and  useful  business  facts  which  they  summarize 
and  place  before  the  business  manager  every  morning  for 
his  survey.  By  this  means  he  is  able  to  keep  in  touch  with 
all  those  facts  which  affect  his  own  business.  The  volume 
of  business  literature  is  becoming  so  vast  that  no  individual 
is  able  to  read  it  all.  Such  summaries  become  quite  essen- 
tial and,  of  course,  if  they  are  well  made  are  of  great  prac- 
tical benefit.  The  business  barometers,  however,  have  not 
yet  found  their  way  fully  into  the  confidence  of  the  business 
man.  He  still  doubts  their  fundamental  soundness.  He 
does  not  believe,  for  instance,  that  the  effect  of  periodical 
changes  can  be  reduced  to  figures.  One  cannot  judge 
beforehand,  he  says,  the  effect  upon  prices  of  the  election  of 
a  Republican  Presiden«t  or  of  a  Democratic  Senator,  or 
of  a  Socialist  Congressman.  It  is  not  possible,  either,  for 
one  to  reduce  to  a  mathematical  formula  the  effect  of  the 
election  of  a  mayor  in  one  of  our  large  cities.  Yet  such 
factors  enter  into  the  construction  of  the  business  barome- 
ters. They  no  doubt  have  a  useful  purpose  and  afford 
a  method  of  broad  survey  such  as  no  individual  could  pos- 
sibly secure  for  himself.  Up  to  this  time,  however,  they 
cannot  be  called  scientific. 

The  Organization  Necessary.  Whatever  form  research 
work  takes  it  must  have  organization.  The  pertinent 
query,  therefore,  is,  What  is  the  best  type  of  organization.'' 
Such  a  question  cannot  be  answered  directly.  One  prin- 
ciple, however,  is  clear.  It  must  be  of  such  sort  as  to 
give  the  control  of  method  and  of  work  into  the  hands  of 
some  capable  manager.     Like  every  other  department  of 


ORGANIZATION  FOR  RESEARCH  319 

business,  it  must  have  its  policy,  it  must  have  its  system, 
it  must  have  its  personnel.  As  the  work  grows,  the  organ- 
ization will  become  more  complex  and  the  manager  will 
secure  experts  as  his  assistants  in  statistics,  in  drawing, 
in  copy  work,  and  so  on..  It  is  possible  to  point  out  only 
in  a  general  way  the  essential  parts  of  the  organization 
for  commercial-research  work. 

The  first  requirement  for  research  work  is  a  knowledge 
of  statistics.  It  is  wise  that  the  manager  himself  should 
be  thoroughly  acquainted  with  statistical  methods  of  anal- 
ysis and  presentation.  In  any  case,  there  must  be  some 
one  in  the  department  who  can  make  use  of  the  principles 
of  statistics.  A  large  New  York  bank,  that  has  a  well- 
organized  research  department,  says  that  "  The  statis- 
tical department  includes  a  number  of  men  who  are  highly 
trained  in  their  work."  (Personal  letter.)  Another 
large  bank  writes  that  "  We  have  a  definite  organization 
for  research  purposes ;  it  is  new  and  in  a  formative  con- 
dition, but  I  would  outline  it  about  as  follows:  (a)  sta- 
tistical and  general  economic  research.  On  work  of  this 
type  I  now  have,  beside  m^^self,  two  trained  assistants 
and  some  clerical  help."  (Personal  letter.)  Experience 
has  thus  shown  the  need  for  at  least  elementary  statistical 
training.  In  the  past  statistical  work  has  had  to  do  with 
social  and  financial  investigations,  but  this  new  movement 
of  business  research  is  carrying  over  the  same  principles. 
The  manager  of  one  research  department  has  written: 
"  As  to  the  kind  of  training  demanded  for  this  sort  of 
work,  I  can  make  my  reply  perfectly  definite  to  you  by 
saying  that  it  is  a  combination  of  practical  statistical 
experience  and  commercial  research.  I  am  disposed  not 
to  take  any  one,  if  I  can  possibly  avoid  it,  who  has  not  had 


320  COMMERCIAL  RESEARCH 

statistical  experience  in  sta'te  or  federal  service,  as  it  is 
the  only  training  school  I  know  equipped  to  give  efficient 
training  in  this  direction."      (Personal  letter.) 

The  second  requirement  for  the  organization  of  research 
work  is  that  there  shall  be  established  some  system  for  fil- 
ing. Data  of  many  different  kinds  will  be  constantly 
pouring  into  the  research  department.  There  is  imme- 
diate need  to  file  away  the  material  in  such  manner  that 
it  will  be  readily  accessible  when  needed.  To-day  so  many 
business  facts  are  fugitive ;  they  seem  of  no  importance 
because  one  does  not  need  them  at  the  moment  they  ap- 
pear. It  is  a  useful  practice,  however,  to  keep  such  facts 
where  they  may  be  found  without  difficulty  when  the  occa- 
sion for  their  use  arrives.  Many  a  research  manager  has 
been  glad  of  his  practice  of  filing  away  material  that 
seemed  at  the  moment  of  no  great  value.  There  are  many 
kinds  of  filing  systems  which  will  serve  the  purpose  ad- 
mirably. Some  of  these  are  simple  and  some  are  very 
complex.  The  kind  that  will  be  used  will  depend  upon, 
first,  the  nature  of  the  work,  and,  second,  the  volume  of 
the  business  which  will  come  to  the  department.  A  small 
file  will  serve  a  small  business,  but  a  large  firm  will  de- 
mand a  more  complete  sj^stem. 

For  taking  care  of  the  filing  system  and  for  general 
tabulation  work,  some  one  is  needed  who  has  had  experi- 
ence and  training  in  this  line.  It  is  not  every  one  who 
is  capable  of  filing  material  in  a  satisfactory  manner. 
There  seems  to  be  a  natural  gift  for  work  of  this  kind. 
There  are  those  who  find  it  almost  second  nature  to  work 
in  a  systematic  manner;  to  others  the  rigid  requirements 
of  careful  filing  become  irksome. 

The  main  point  to  keep  in  mind  in  this  connection  is 
that  the  manager  of  research  work  must  be  free  from  too 


ORGANIZATION  FOR  RESEARCH         321 

much  detail  in  the  same  way  that  any  other  manager  is 
left  free  to  think  about  his  problems.  A  considerable  part 
of  commercial  research  can  be  done  by  a  clerical  force  that 
has  not  had  much  training.  There  is  much  routine  work 
to  be  done  that  requires  time  and  energy  and  which  the 
manager  should  not  be  compelled  to  do. 

As  the  research  department  grows  there  will  likewise 
grow  a  need  for  a  librarian  to  take  care  of  the  books  and 
pamphlets  which  are  received.  It  is  noticeable  to-day 
that  the  number  of  books  on  business  subjects  has  vastly 
increased.  This  is  a  part  of  the  new  phase  of  business. 
The  business  man  is  supposed  to  be  a  reader  of  books  in 
a  way  that  he  has  never  been  before.  He  is  becoming  a 
student ;  he  must  even  become  a  theorist.  In  any  case, 
he  is  not  progressive  unless  he  reads  more  than  the  news- 
paper or  trade  journal  that  comes  to  his  desk.  The  large 
business  will  probably  require  the  entire  time  of  a  li- 
brarian who  will  have  training  in  the  knowledge  of  sources 
of  material  and  possibly  in  methods  of  filing  and  cata- 
loguing. 

The  business  man  has  never  had  a  true  sense  of  his- 
torical values.  He  has  lived  in  to-day  and  planned  for 
to-morrow,  and  has  let  the  dead  past  bury  its  dead.  This 
has  undoubtedly  been  a  mistake.  Much  of  value  may  be 
learned  from  the  history  of  an  institution.  Now  and 
again,  to  be  sure,  business  men  who  have  retired  from 
active  affairs  have  found  the  leisure  to  write  in  the  form 
of  autobiographies  the  experiences  which  they  have  had 
in  their  business  life.  This  work,  however,  is  not  suflB- 
cient.  It  is  almost  incredible  but  true  that  one  of  the  larg- 
est mail-order  houses  in  the  world  does  not  to-day  have  a 
complete  file  of  its  own  catalogues.  It  is  typical  of  large 
businesses  that  they  do  not  know  the  history  of  their  own 


322  COMMERCIAL  RESEARCH 

development.  Part  of  the  work  of  the  librarian  should  be 
compiling  such  a  history  for  use  of  the  manager  in  any 
manner  he  may  see  fit.  Unexpected  knowledge  will  come  to 
hand  in  this  way.  The  business  history  of  the  country, 
for  instance,  may  really  be  seen  in  the  development  of 
advertising.  If  these  historical  records  are  filed  away 
or  are  utilized  in  some  such  form  as  to  give  the  history  of 
an  institution,  the  work  will  be  of  very  great  value. 

The  research  department  requires,  also,  that  there  be 
some  one  who  can  write  letters  in  attractive  form  and 
who  can  construct  questions  that  will  successfully  secure 
the  desired  information.  This,  too,  may  fall  to  the  lot 
of  the  manager,  or  there  may  be  some  one  in  the  depart- 
ment who  is  specially  trained  along  this  line.  As  has  been 
said,  many  business  managers  to-day  are  giving  consid- 
erable attention  to  this  subject  of  writing  letters ;  corre- 
spondence is  becoming  a  revived  art. 

There  must  be  some  one  in  the  research  department  who 
can  work  intelligently  with  accounts.  As  has  been  said 
above,  these  records  are  being  kept  for  a  new  purpose. 
He  who  is  engaged  in  research  work  must  be  able  to  in- 
terpret in  terms  of  business  control  the  essential  accounts 
kept  by  the  establishment.  Here,  indeed,  may  be  found 
the  real  weakness  in  the  institution,  the  real  cause  for 
lack  of  success.  If  the  manager  of  the  research  depart- 
ment is  not  acquainted  with  accounting  methods  and  has 
no  assistants  who  can  take  this  work,  it  will,  of  course,  be 
possible  to  cooperate  with  the  accounting  department  and 
secure  from  that  source  the  necessary  knowledge. 

Training  of  the  Investigator.  Work  in  commercial  re- 
search will  be  just  as  valuable  as  the  capacity  of  the  in- 
vestigator behind  it  is  able  to  make  it.  This  is  true  of 
all  kinds  of  analytical  studies.     The  value  of  laboratory 


ORGANIZATION  FOR  RESEARCH         323 

experiments  depends  directly  upon  the  accuracy  and  the 
judgment  of  the  investigators.  What  is  true  in  science, 
is  true  likewise  in  business  research.  It  is  necessary  to 
have  a  clear  understanding  of  laboratory  methods,  includ- 
ing how  to  use  apparatus,  how  to  check  up  experiments, 
when  and  how  to  employ  reagents,  what  difficulties  there 
are  to  watch,  what  conclusions  may  be  drawn  from  the 
reactions  of  the  material  under  study.  Something  of  the 
same  sort  is  necessary  in  the  training  of  a  business  in- 
vestigator. Considerable  native  capacity  is,  of  course, 
desirable.  This  should  consist  in  the  power  of  observa- 
tion and  accurate  reporting  of  details.  It  has  been  said 
that  the  best  advertising  men  are  those  who  have  had 
experience  as  newspaper  reporters.  This  fact  is  explained 
on  the  basis  that  reporters  are  taught  to  observe  details 
with  accuracy  and  to  report  them  with  precision.  Such 
power  as  this  is  of  great  value  to  commercial  research. 

In  addition  to  native  capacity,  such  as  has  been  indi- 
cated, the  investigator  needs  to  have  a  "  head  for  busi- 
ness." He  must  first  be  interested  in  the  details  of  busi- 
ness, he  must  see  the  business  problem,  and  he  must  be 
able  to  discern  those  intangible  relationships  between  con- 
crete facts  and  business  principles.  Some  men  are  able 
to  see  business  opportunities  where  others  pass  blindly 
by.  The  former  will  make  far  better  investigators  than 
the  latter.  He  who  walks  along  the  busy  thoroughfare 
with  his  head  in  the  clouds  is  not  likely  to  see  the  intensely 
interesting  human  element  in  the  business  relationships 
of  to-day.  The  eye  and  the  ear  of  the  investigator  must 
be  constantly  open  and  alert  for  all  the  data  that  may  be 
found  wherever  he  goes.  Interest  in  business  is  a  prime 
essential  for  the  one  who  is  to  engage  in  commercial 
research. 


324  COMMERCIAL  RESEARCH 

It  is  likewise  important  that  the  business  investigator 
shall  have  a  methodical  mind.  Business  facts  are  of  varied 
importance  and  kind.  Disconnected  facts  will  lead  one 
nowhere.  They  must  be  collected  and  collated  so  as  to 
form  a  logical  system  to  be  analyzed.  This  means,  in 
other  words,  that  the  investigator  must  be  careful  and 
systematic  in  his  thinking  as  well  as  in  his  habits  of  work. 
Such  capacity,  also,  is  of  prime  importance  to  the  busi- 
ness investigator. 

As  has  been  said,  no  one  can  go  far  in  commercial  re- 
search without  knowing  and  being  able  to  make  use  of 
statistical  methods.  These  are  the  laboratory  apparatus 
for  the  business  investigator.  He  cannot  work  with  pre- 
cision or  with  anything  approaching  scientific  carefulness 
without  using  them.  Nevertheless,  it  must  be  remembered 
that  the  principles  of  statistics  are  merely  a  means  to  an 
end;  they  are  the  vehicle  of  expression  and  analysis,  and 
not  the  substance.  It  is  one  thing  to  know  statistical 
principles ;  it  is  quite  another  to  apply  them  skillfully  and 
intelligently.  Both  of  these  things  are  required  of  one 
engaged  in  commercial  research. 

It  may  be  taken  for  granted  that  the  investigator  into 
business  problems  should  have  some  knowledge  of  account- 
ing. Problems  of  business  are  exceedingly  complex. 
Those  that  seem  simplest  in  the  beginning  ramify  in  the 
most  unexpected  manner.  Sooner  or  later  most  of  them 
will  carry  the  investigator  to  the  records  of  the  business. 
Unless  he  is  able  to  make  use  of  these  records  intelligently, 
he  will  not  be  fully  equipped  for  his  duty.  This  require- 
ment includes  both  the  principles  of  commercial  account- 
ing and  the  principles  of  cost  accounting.  One  need  not 
be  an  expert  in  either  of  these  fields  for  successful  work. 


ORGANIZATION  FOR  RESEARCH         325 

but  he  does  need  to  understand  the  principles  enough  to 
interpret  accounts  intelligently. 

There  are  many  other  requirements  for  the  ideal  train- 
ing of  an  investigator.  He  should,  for  example,  be  able 
to  write  business  letters  of  an  acceptable  character.  A 
considerable  amount  of  his  work  will  consist  in  securing 
material  through  the  mail.  He  must  have  skill  in  mak- 
ing schedules.  These  will  differ  in  some  essential  par- 
ticulars in  every  problem  taken  up.  Adaptation  is  needed 
in  order  to  make  the  questions  fit  the  particular  problem. 
The  duty  of  doing  this  successfully  falls  upon  the  in- 
vestigator. He  should  also  have  a  bent  of  mind  for  trans- 
lating data  into  definite  terms.  This  discussion  has  al- 
ready pointed  out  the  fact  that  a  great  part  of  business 
data  is  made  up  of  estimated  values.  These  are  neces- 
sarily more  or  less  intangible  and  yet  they  must  be  re- 
duced to  definite  terms.  The  capacity  for  doing  this  must 
belong  to  the  investigator. 

It  is  assumed  that  he  will  also  have  a  grounding  in  eco- 
nomics. This  is  so  important  as  to  become  a  funda- 
mental requirement.  It  would  be  of  advantage  to  him. 
if  he  had  certain  manual  skill  in  drawing  charts  and  make 
ing  graphs.  In  a  large  research  department  such  work 
may  be  given  to  one  specially  trained  in  this  art.  Criti- 
cism and  judgment  of  these  charts  and  graphs,  however, 
will  be  demanded  from  the  manager  of  the  research  work. 
He  will  do  this  better  if  he  has  had  experience  himself 
in  constructing  them.  It  may  be  assumed,  also,  that  the 
investigator  will  have  a  groundwork  of  general  business 
knowledge.  So  much  depends  upon  good  judgment  in  the 
carrying  out  of  every  investigation,  and  good  judgment 
demands  a  sound  basis  in  a  knowledge  of  facts.     A  fairly 


326  COMMERCIAL  RESEARCH 

clear  understanding  of  general  business  conditions  is   a 
very  large  element  of  good  sense  in  business  research. 

It  is  not  possible,  of  course,  to  find  any  individual  who 
has  all  these  traits  developed  to  a  high  degree.  The  re- 
quirements here  are  for  an  ideal  investigator.  Certain 
fundamental  requirements,  however,  are  so  essential  to 
accurate  work  and  particularly  in  the  guiding  of  the 
new  movement,  that  such  emphasis  becomes  necessary. 
It  is  probable  that  commercial  research  will  quickly  feel 
the  lack  of  competent  leaders  just  as  industrial  research 
has  found  it  necessary  to  train  competent  leaders  through 
years  of  patient  work  and  experience.  Such  forces  as 
commercial  and  industrial  research  will  necessarily  make 
their  way  slowly  among  the  great  masses  of  business  men. 
Only  the  most  progressive  leaders  will  appreciate  their 
value.  It  is  highly  important,  of  course,  that  in  the  be- 
ginning commercial  research  should  have  a  high  type  of 
leadership. 

Equipment  for  Research  Work.  The  equipment  for 
carrying  on  such  work  as  has  been  indicated  here  will 
naturally  vary  with  the  character  of  the  business  and  the 
importance  of  the  research  work.  There  are,  however,  a 
few  essentials  for  carrying  on  any  kind  of  competent  re- 
search. One  of  these  is  good  stenographic  service.  This 
is  quite  indispensable.  There  must  also  be  some  sort  of 
filing  system  not  only  to  take  care  of  the  large  amount 
of  correspondence  which  develops  from  investigations, 
but  also  for  preserving  in  an  accessible  and  convenient 
form  the  clippings  and  the  maps,  charts  and  graphs  which 
result  from  this  kind  of  work.  It  is  quite  necessary, 
too,  that  the  research  manager  shall  make  the  proper 
business  connections.  He  must  depend  upon  men  in  actual 
business   for  cooperation   in  his   work.      It   is   one  of  his 


ORGANIZATION  FOR  RESEARCH         327 

first  duties  to  establish  their  confidence  in  his  work  and 
so  to  engage  their  interest  and  cooperative  effort.  It 
does  not  seem  fair  to  ask  business  men  to  give  freely  of 
their  knowledge  and  experience  without  any  return  except 
the  gratitude  of  the  investigator.  There  is  a  possibility 
of  splendid  cooperation  on  the  part  of  these  two  parties 
that  should  be  of  great  benefit  to  both. 

An  investigation  may  be  either  local  or  national  In 
scope.  In  both  cases  it  is  practically  required  that  the 
research  department,  and  especially  the  business-research 
company,  shall  have  a  competent  corps  of  investigators. 
This  is  an  exceedingly  difficult  matter  where  the  research 
covers  a  broad  territory.  Some  companies  have  relied 
on  unseen  and  unknown  men  whose  capacity  has  been  of 
the  most  varied  character.  It  is  never  wise,  of  course, 
to  select  workmen  who  are  to  carry  on  their  work  undi- 
rected, sight  unseen.     This  has  often  seemed  necessary. 

Sometimes  the  pupils  from  the  commercial  course  in 
high  schools  have  been  employed  under  the  inadequate 
direction  of  busy  instructors.  At  other  times  members 
of  business  courses  in  Y.  M.  C.  A.'s  have  been  utilized. 
College  men  who  are  interested  in  business  and  particu- 
larly those  who  are  carrying  on  courses  in  schools  of 
commerce  have  been  used  in  work  of  this  kind.  They  often 
have  free  half  days  or  leisure  hours  which  they  can  devote 
to  such  investigations.  In  some  cases  it  has  been  found 
possible  to  make  use  of  traveling  salesmen.  Their  work 
along  this  line  has  naturally  been  incidental  to  their  main 
work  of  selling  goods.  This  arrangement  has  not  been 
and  can  never  be  wholly  satisfactory.  A  man  cannot 
serve  acceptably  two  masters. 

Of  all  these  investigators  it  is  probably  true  that  the 
college  men  have  proved  most  efl'icient.      They  are  the  best 


328  COMMERCIAL  RESEARCH 

all-round  investigators  to  be  found.  For  the  most  part 
they  are  reliable  and  they  are  more  mature  than  high- 
school  pupils  and  generally  are  interested  in  research 
work.  Some  advertising  agencies  have  a  corps  of  trained 
investigators  who  devote  all  their  time  to  work  of  this 
kind.  This  is  doubtless  the  best  arrangement  that  can 
be  made,  but  no  single  company  can  employ  enough  of 
such  men  to  cover  a  wide  scope  of  territory.  The  trained 
investigators,  therefore,  work  intensively  in  certain  trade 
centers  and  the  rest  of  the  territory  is  covered  by  mail 
or  through  local  representatives.  The  last  named  are 
men  in  business  such  as  clerks,  or  managers  or  even  pro- 
prietors in  small  rural  communities  who  are  willing  to 
serve  in  such  capacity. 

Conclusion.  This  survey  of  the  organization  for  re- 
search work  has  been  intended  to  cover  all  types.  It 
ranges  from  the  merely  incidental  work  of  a  small  organ- 
ization to  the  more  complex  type  of  the  business-research 
company.  In  every  case  the  same  principles  of  organiza- 
tion are  seen  to  apply.  There  is  no  doubt  but  much  im- 
provement will  be  made  in  the  near  future  in  work  of 
this  character,  but  it  is  extremely  important  that  care- 
fulness and  comprehensiveness  shall  be  the  primary  aims 
from  the  start.  Many  new  movements  have  suffered  from 
incompetent  leaders.  There  is  tremendous  importance  in 
getting  started  right.  While  it  may  not  be  possible  for 
the  manufacturer  or  merchant  to  meet  all  the  require- 
ments indicated  in  this  discussion,  it  should  be  possible 
for  him  to  discover  what  the  essentials  for  research  really 
are.  It  is  not  every  one  who  can  investigate  successfully. 
Indeed,  there  is  need  of  a  high  type  of  training  in  work  of 
this  kind.     If  business  is  to  become  a  profession,  which 


ORGANIZATION  FOR  RESEARCH         329 

is  the  ideal  expressed  in  this  discussion,  then  a  high  stand- 
ard of  skill  and  capacity  is  demanded  for  research  work. 

Note:  Commercial  research  work  that  is  done  only  incidentally 
will  require  some  mechanical  devices  for  accuracy  and  speed  of  work. 
If  there  is  much  computation  to  be  done,  a  calculating  machine  will 
readily  justify  itself.  A  slide  rule  is  easily  mastered  and  saves  much 
time  and  labor  and  many  errors.  It  is  not  expensive  to  secure  a 
drawing  board,  a  drawing  pen,  tacks,  ink,  and  other  material.  There 
are  many  dealers  who  carry  a  complete  supply  of  drawing  materials 
and  who  will  gladly  give  advice  on  the  latest  device  for  saving  time, 
labor  and  errors. 


CHAPTER  XI 

SOME    FUNDAMENTAL    ELEMENTS    OF    BUSINESS   ANALYSIS 

Three  fundamentals  —  Raw  materials  and  finished  products  —  Raw 
materials  —  Finished  products  —  Classifying  commodities  —  Scientific 
analysis  —  Conclusion. 

All  research  work  into  business  problems  is  as  yet  in 
its  early  infancy.  The  first  steps  are  being  taken  with 
some  uncertainty  and  in  a  halting  manner,  because  men 
do  not  know  how  to  begin  in  the  new  field.  The  whole 
vast  scope  of  business  seems  so  complex,  so  interlocking, 
that  there  is  no  definite  place  to  start.  When  the  manu- 
facturer or  the  merchant  has  once  become  interested  in 
knowing  more  about  his  business  the  practical  problem 
arises  as  to  what  facts  to  know.  The  solution  here,  of 
course,  depends  upon  what  one  wants  to  know.  This 
brings  one  again  back  to  the  fundamental  question :  What 
are  the  elements  of  business  analysis?  It  is  proposed  now 
to  discuss  this  highly  important  question. 

Three  Fundamentals.  It  is  not  enough  to  say  to  a 
business  man :  "  You  should  know  your  business  more 
thoroughly."  His  reply  at  once  is :  "  How  can  I  know 
my  business.''"  The  burden  is  then  upon  the  adviser  to 
find  a  workable  method  for  analysis.  There  are  certain 
fundamentals  with  which  all  analysis  should  begin. 

One   of   the   first   obstacles    to   the   acceptance   of   any 

workable  method  is  the  widespread  and  persistent  belief 

that    every    business    is    unique,    and    that    its    problems, 

therefore,  are  individual  and  do  not  permit  of  generaliza- 

330 


ELEMENTS  OF  BUSINESS  ANALYSIS      331 

tion.  It  will  require  years  of  education  for  the  general 
business  manager  to  divest  himself  of  this  persistent  be- 
lief. He  will  probably  scoff  at  theorists  and  will  be  dis- 
inclined to  believe  that  any  one  on  the  outside  can  really 
know  his  problems.  As  one  business  man  has  said,  "  The 
practical  business  man  will  know  all  the  problems  and 
will  have  met  them  long  before  the  theorists  can  realize 
them."  It  is  this  attitude  which  forms  the  greatest  ob- 
stacle to  intelligent  commercial  research.  There  must 
be  certain  fundamental  problems  that  are  common  to  all 
kinds  of  business.  That  we  cannot  to-day  identify  tliese 
is  due  to  our  ignorance,  not  to  their  non-existence.  As  a 
matter  of  fact,  it  must  be  true  that  as  our  knowledge  ex-, 
tends  we  shall  be  able  more  clearly  to  outline  the  funda- 
mental elements.  From  the  very  nature  of  the  case,  the 
more  fundamental  these  elements,  the  more  nearly  com- 
mon to  all  must  they  become. 

It  is  held  in  this  discussion  that  there  are  general 
and  fundamental  problems.  What  will  here  be  said  on 
this  subject  will  have  to  do  with  the  problems  of  market- 
ing as  distinguished  from  the  problems  of  production. 
In  this  field  of  marketing,  then,  the  general  business  prob- 
lem, so  far  as  the  manufacturer  or  the  merchant  is  con- 
cerned, falls  naturally  and  simply  into  three  parts. 
There  is,  first,  the  commodity,  the  article,  or  the  line  of 
articles,  which  is  to  be  handled.  Whether  this  commodity 
is  something  concrete  or  is  an  abstraction  like  the  service 
of  the  professional  man  or  the  energy  of  the  workman, 
makes  no  difference.  In  any  case  it  is  a  product  offered 
for  sale.  However  the  problem  connected  with  it  may  dif- 
fer in  minor  details,  the  essential  principle  is  the  same ; 
namely,  that  one  must  knoAv  his  product. 

The  second  fundamental  is  the  market  which  is  to  be 


332  COMMERCIAL  RESEARCH 

reached  in  selling  this  commodity.  This  means  an  anal- 
ysis of  demand,  for  a  market  is  nothing  more  or  less  than 
a  demand  —  that  is,  a  human  want  for  an  article  backed 
up  by  the  required  purchasing  power.  Whatever  the 
character  of  the  commodity,  if  it  enters  at  all  into  the 
marketing  problem  of  the  business  man,  there  arises  the 
need  of  an  analysis  of  the  demand  for  it.  Here,  no  doubt, 
there  are  many  details  that  are  unique  for  each  commod- 
ity, but  nevertheless,  the  broad  outlines  for  the  problem 
are  the  same  for  all.  Just  as  the  manufacturer  or  the 
merchant  must  know  the  commodity  which  he  has  for  sale, 
so  likewise  must  he  know  the  demand  or  market  for  it. 

The  third  fundamental  is  the  trade  organization  for 
carrying  the  commodity  to  the  market.  Whether  simple 
or  complex,  there  is  in  every  case  some  kind  of  organiza- 
tion. Is  it  the  best  possible  one  for  marketing  any  given 
commodity.?  This  question  cannot  be  answered  without 
an  intimate  knowledge  of  the  unique  details  connected  with 
this  commodity.  But  here,  again,  the  principle  holds 
that,  regardless  of  distinctive  details,  there  is  the  uni- 
versal problem  of  a  trade  organization.  To  the  knowl- 
edge of  the  commodity  and  the  market  there  must  be  added 
a  knowledge  of  the  trade  organization. 

These  three  fundamentals  are,  of  course,  vague  and 
general  in  character.  Probably  no  one  would  seriously 
question  their  existence.  In  fact  to  speak  of  them  in 
detail  may  be  emphasizing  the  obvious.  And  yet  in  tak- 
ing up  the  subject  of  the  fundamental  elements  of  business 
analysis,  it  is  necessary  to  begin  with  these  obvious  and 
generally  accepted  principles.  On  this  basis  the  follow- 
ing discussion  will  be  carried  out.  It  is  now  proposed 
to  show  that  certain  other  problems  incident  to  the  anal- 
ysis of  the  commodity,  to  the  analysis  of  the  market,  and  to 


ELEMENTS  OF  BUSINESS  ANALYSIS      333 

the  analysis  of  the  trade  organization  are  likewise  general 
and  fundamental.  It  is  hoped  that  this  survey  of  ele- 
mentary business  problems  will  be  an  aid  to  any  one  who 
engages  in  research  work  for  the  first  time.  A  great 
American  statesman  at  the  time  of  a  crisis  once  said:  "  If 
we  can  see  where  we  are  and  whither  we  are  tending,  we 
shall  better  know  what  to  do  and  how  to  do  it."  Belief 
in  the  soundness  of  this  principle  as  a  guide  in  commer- 
cial research  has  prompted  a  discussion  of  these  funda- 
mental elements. 

Raw  Materials  and  Finished  Products.  While  it  is  not 
possible  to  make  finely  drawn  distinctions  in  marketing 
problems,  it  is  often  of  value  to  establish  classifications 
on  broad  outlines.  It  is  in  this  way  that  all  commercial 
commodities  may  be  grouped  into  two  general  classes. 
There  are  the  raw  materials  of  commerce  and  there  are 
the  finished  products.  Between  these  two  and  sharing  the 
characteristics  of  both  is  another  class  that  appears  in 
government  reports  called  semi-manufactured  goods. 
Into  this  third  class  may  be  put  all  those  commodities 
that  have  been  partly  fabricated  but  are  on  their  way 
toward  a  further  productive  process.  This  group  may 
be  disregarded  from  the  point  of  view  assumed  here,  be- 
cause there  are  no  distinct  problems  connected  with  it. 
The  discussion,  therefore,  will  be  confined  to  the  first- 
mentioned  general  groups  of  raw  materials  and  finished 
products. 

There  are  similar  problems  connected  with  these  two 
groups  of  commodities,  but  in  some  respects  they  are  fairly 
distinct.  For  clearness  of  analysis,  they  are  to  be  treated 
separately  in  spite  of  the  fact  that  some  duplication  will 
arise.  The  endeavor  will  be  to  apply  the  analysis  given  in 
the  preceding  paragraphs  to  these  products. 


334  COMMERCIAL  RESEARCH 

Raw  Materials.  These  are  goods  that  are  on  their  way 
to  the  factory,  or  goods  that  need  no  special  productive 
process.  Some  food  products,  for  example,  pass  di- 
rectly to  the  consumer,  although  they  are  in  a  raw  ma- 
terial state.  It  is  also  true  that  a  product  may  be  a 
finished  product  from  one  point  of  view  while  it  is  at  the 
same  time  a  raw  material  from  another  point  of  view. 
An  illustration  of  this  is  to  be  found  in  the  feedstuffs,  such 
as  corn,  hay,  and  ensilage,  which  are  produced  on  the  farm 
and  which  may  be  sold  to  the  market  or  fed  to  live  stock. 
In  the  former  case  they  may  be  considered  as  ready  for 
the  market  while  in  the  latter  case  they  must  be  con- 
sidered as  the  raw  materials  of  manufacture.  Another 
illustration  is  that  of  pig  iron,  which  may  be  a  finished 
product  for  the  iron  man  but  a  raw  material  for  the  steel 
man.  Nevertheless,  the  same  problems  underlie  the  mar- 
keting of  these  commodities. 

The  first  problem  connected  with  raw  materials  is  the 
analysis  of  the  commodity.  This  means  a  more  complete 
knowledge  of  all  its  characteristics  in  so  far  as  they  affect 
the  commercial  problems  connected  with  it.  What  does 
it  mean  in  this  sense  to  know  one's  product  .f'  There  is 
probably  no  entirely  satisfactory  answer  to  this  query, 
even  for  the  simplest  commodity,  but  it  includes  as  com- 
plete an  analysis  as  possible  of  the  article  in  all  its  com- 
mercial aspects.  The  merchant  or  the  manufacturer 
should  know  likewise  the  historical  development  of  his 
commodities,  what  improvements  liave  been  made,  and 
why.  He  should  study  the  physical  characteristics  of 
his  product,  the  meclianical  problems  connected  with  it, 
the  size,  form,  perishability,  complexity,  and  even  the  pos- 
sibility of  technical  or  chemical  analysis. 

It  has  been  said  that  automobiles  and  farm  machinery 


ELEMENTS  OF  BUSINESS  ANALYSIS      335 

are  making  mechanical  experts  out  of  the  American 
farmers.  The  merchant  and  manufacturer  should  also 
become  greater  experts  in  their  goods.  One  needs  to 
know  all  about  the  supply  of  the  commodity,  whether  it 
is  seasonal,  intermittent,  or  steady ;  whether  there  is  any 
uncertainty  of  supply.  He  should  give  critical  attention 
to  the  size  of  units  in  which  his  commodity  is  handled ;  he 
should  study  the  preparation  required  for  making  it 
ready  for  market ;  he  should  know  whether  this  particular 
commodity  is  independent  or  must  be  connected  with  other 
commodities ;  that  is,  a  group  product.  He  will  need  to 
give  careful  study  to  the  geographical  location  of  the 
producing  regions  in  order  to  know  the  characteristics 
of  these  regions  and  the  tendency  for  the  supply  to  in- 
crease or  decrease ;  he  will  need  to  chart  the  volume  of 
production  for  a  number  of  years  to  show  the  tendency  in 
output ;  he  should  compare  with  this  also  the  value  of  the 
output  for  several  years,  likewise,  to  show  the  tendencies. 
It  would  be  wise  in  addition  to  study  the  surplus  or  "  vis- 
ible supply  "  for  a  number  of  years,  because  this  is  a 
significant  factor  in  the  relationship  between  demand  and 
supply.  This  method  of  analysis  can  be  applied  to  every 
kind  of  commodity,  no  matter  what  its  consistency  or  to 
what  kind  of  market  it  may  be  going.  In  other  words, 
the  analj^sis  of  the  commodity  is  a  fundamental  element 
in  business  analysis. 

One  cannot  know  the  product  which  he  handles  thor- 
oughly unless  he  is  fully  acquainted  with  the  market  de- 
mand for  it.  It  follows,  therefore,  that  the  analysis  must 
extend  to  the  market.  Where  and  what  is  this  market.? 
The  answer  to  this  query  should  discover  the  geographical 
boundaries,  the  climatic  influences,  the  seasonal  consid- 
erations, the  social  groups,  the  historical  tendencies  for 


336  COMMERCIAL  RESEARCH 

the  market  to  increase  or  to  decrease.  Here,  likewise, 
should  come  a  study  of  competition,  both  within  and  be- 
tween market  centers,  with  a  careful  consideration  of  the 
basis  of  competition,  whether  it  is  price,  quality,  or  serv- 
ice. There  will  likewise  come  the  question  of  population 
movements  and  standards  of  living  in  their  relation  to 
changing  demand.  Equally  important  is  the  question  of 
financial  and  trade  conditions.  Upon  what  financial  con- 
dition does  the  marketing  of  this  commodity  depend? 
What  will  be  the  effect  of  a  partial  or  a  total  crop  fail- 
ure upon  the  marketing  of  this  product?  What  will  be 
the  effect  of  a  crisis  or  a  panic?  All  of  these  considera- 
tions are  essential  to  a  thorough  understanding  of  the 
market  demand  for  any  commodity.  It  may  be  that  the 
character  of  the  commodity  will  change  the  emphasis  in 
the  analysis,  but  it  is  claimed  that  these  principles  are 
fundamental  in  the  investigation  of  marketing  problems. 
The  third  general  consideration  is  the  trade  organiza- 
tion, or  the  distributive  machinery  for  carrying  the  goods 
to  the  consumer.  An  analysis  here  should  show  the  es- 
sential functions  to  be  performed  and  the  existing  mechan- 
isms and  devices  for  performing  them.  There  is,  for  in- 
stance, the  human  factor  in  the  trade  organization ;  that 
is,  the  middleman,  whether  general  wholesaler,  jobber, 
broker,  commission  man,  retailer,  or  the  agent.  Through 
how  many  hands  do  one's  goods  pass  on  their  way  to  the 
consumer?  Is  the  system  simple  or  complex?  Is  it,  in- 
deed, essential  as  it  now  exists?  Only  recently  a  large 
manufacturer  of  typewriters  who  had  been  using  the  same 
distributive  mechanism  as  his  competitors  decided  to  throw 
the  system  overboard  and  to  appeal  directly  to  the  con- 
sumer, on  the  basis  of  a  reduced  price.  In  other  words, 
he  disbanded  his  agent  system  and  attempted  to  sell  type- 


ELEMENTS  OF  BUSINESS  ANALYSIS      337 

writers  by  mail.  His  act  was  not  only  daring  and  orig- 
inal, but  it  was  also  a  public  acknowledgment  that  the  old 
distributive  system  had  cost  51%  of  the  consumer  price. 
The  manufacturer  and  merchant  should  thus  be  independ- 
ent of  all  middlemen,  unless  their  services  are  essential. 
One  can  know  how  important  these  services  are  only  by 
an  analysis  of  them.  It  is  claimed  that  the  middleman 
will  continue  to  exist  only  so  long  as  his  services  are 
really  economic  services.  What  are  economic  services,  and 
do  all  middlemen  perform  them?  These  are  pertinent 
queries  in  the  marketing  of  any  kind  of  raw  material. 
They  are  likewise  fundamental  elements  in  business  anal- 
ysis. 

In  addition  to  the  selection  of  the  channels  of  trade  with 
which  one  must  deal,  there  are  numerous  other  factors 
which  need  investigation.  There  is,  for  instance,  the  ques- 
tion of  transportation.  The  progressive  manufacturer 
and  merchant  will  want  to  understand  this  problem  fully. 
A  recent  study  by  an  expert  in  a  large  trade  center  re- 
vealed the  most  absurd  practices  in  routing  freight  in  use 
by  manufacturers  and  merchants.  Both  time  and  money 
were  being  wasted  through  lack  of  knowledge  of  the  trans- 
portation problem.  There  are  also  the  organized  markets 
such  as  the  grain  exchanges,  cotton  exchanges,  and  coffee 
exchanges,  which  have  risen  to  perform  certain  necessary 
functions  in  the  marketing  of  commodities.  The  manu- 
facturer and  merchant  must  look  into  these  institutions 
also. 

There  is  further  the  warehousing  industry  which  needs 
investigation.  Mercantile  warehouses,  bonded  warehouses, 
specialized  warehouses,  such  as  elevators,  cold  storages, 
private  stock  rooms,  are  all  parts  of  the  marketing  organ- 
ization, and  stand  in  need  of  detailed  attention.     There 


338  COMMERCIAL  RESEARCH 

is  the  question  of  inspecting,  grading,  and  weighing  the 
commodity  marketed.  With  the  pressure  for  standard- 
izing commodities  of  all  sorts,  this  function  grows  in 
importance.  Only  in  recent  years  have  we  come  to  a  real- 
ization of  the  need  for  scientific  grading  even  of  such 
staple  products  as  cotton  and  wheat.  In  the  years  to 
come  much  progress  will  undoubtedly  be  made  in  carrying 
the  same  principles  over  into  other  commodities.  There  is 
the  most  important  function  of  collecting  and  controlling 
market  information.  What  is  the  machinery  for  gather- 
ing and  publishing  trade  statistics?  Who  controls  this 
machinery .P  Is  the  information  equally  accessible  to  all.'' 
These,  likewise,  are  pertinent  queries. 

The  culmination  of  the  entire  business  analysis  should  be 
market  prices.  What  are  the  price  factors  and  influences 
connected  with  the  given  commodity?  What  are  the 
prices  at  the  source,  at  the  local  market,  at  the  terminal 
market?  What  is  the  "spread";  that  is,  the  increased 
charge  to  consumer  over  the  prices  paid  to  producer? 
What  part  of  this  goes  to  each  member  of  the  trade 
organization?  Does  it  seem  a  fair  return  for  his  service? 
What  are  the  methods  of  determining  and  quoting  market 
prices?  Who  is  in  control  of  this  machinery?  Is  there 
evidence  that  the  market  is  an  open  competitive  market? 
The  importance  of  such  questions  as  these  is,  of  course, 
self-evident.  Like  the  other  suggestions  for  analysis,  they 
apply  to  every  kind  of  commodity  and  to  every  kind  of 
market.  Once  again  they  are  fundamental  elements  in 
business  analysis. 

There  is  the  financial  machinery  for  the  trade  organiza- 
tion. This,  too,  needs  investigation.  Such  important 
subjects  as  the  bill  of  lading,  the  warehouse  receipt,  and 
the  newly  launched  trade  acceptance  should  occupy  the 


ELEMENTS  OF  BUSINESS  ANALYSIS      339 

critical  interest  of  every  manufacturer  or  merchant. 
What  are  the  essential  principles  connected  with  each  one 
of  these  documents?  Who  has  the  advantage  in  the  trans- 
action b}'  means  of  them?  Why  have  they  come  into  use? 
There  is  also  the  entire  field  of  credit  to  be  examined. 
There  is  the  question  of  discounts.  All  of  these  are  fun- 
damental elements  in  business  analysis. 

The  suggested  analysis  of  raw  material  given  here  is 
based  largely  upon  economic  functions.  "  Service "  as 
used  in  this  discussion  means  the  same  as  a  necessary  eco- 
nomic function.  It  is  possible  to  analyze  raw  materials 
on  this  basis  because  the  whole  marketing  process  has  been 
very  largely  split  up  along  these  lines.  It  does  not  seem 
practicable  to  separate  the  functions  from  the  institutions 
in  the  trade  organization.  For  instance,  there  is  the  gen- 
eral mercantile  warehouse.  This  stands  in  the  minds  of 
most  people  as  a  distinct  institution ;  but  it  has  been  con- 
structed for  the  purpose  of  performing  certain  definite 
services.  These  functions  will  best  be  understood  by  a 
careful  examination  of  the  institution  itself. 

Since  the  analysis  that  has  been  made  here  of  raw  mate- 
rials is  from  the  point  of  view  of  institutions  and  func- 
tions, throughout  the  entire  examination  of  such  market- 
ing problems  there  are  two  main  points  to  keep  in  mind. 
One  of  these  is,  "  Who  bears  the  risk  at  every  step  in  the 
marketing  process?"  The  second  is,  "Who  has  control 
of  the  commodity  as  it  passes  on  its  way  to  market?" 
The  economic  efficiency  of  the  trade  organization  is,  of 
course,  the  ultimate  aim  of  large-scale  business  methods, 
but  no  combination  can  eliminate  these  items.  Risk  and 
control  are  the  two  essential  points  in  the  marketing 
of  raw  materials.  All  attempts  at  the  elimination  of  mid- 
dlemen, all  plans  for  cooperation  in  marketing  of  products. 


340  COMMERCIAL  RESEARCH 

have  been  centered  in  these  two  problems.  Like  the  other 
elements  discussed  in  this  connection,  risk  and  control  are 
fundamental  to  the  entire  marketing  process. 

Finished  Products.  The  analysis  of  finished  products 
from  a  commercial  point  of  view  can  be  carried  much  far- 
ther than  in  the  case  of  raw  materials.  The  obvious  rea- 
son for  this  is  that  in  the  latter  instance  the  character  of 
the  commodities  is,  for  the  most  part,  not  within  man's 
control.  The  dominating  factors  in  farming,  for  instance, 
are  said  to  be  weather  and  climatic  influences.  Neither  of 
these  to-day  will  obey  man's  will.  They  are  certainly 
beyond  his  control.  In  general  it  may  be  said  that  raw 
materials  have  their  characteristics  formed  by  forces  un- 
controlled by  man.  When  it  comes  to  manufactured 
goods,  it  is  readily  seen  that  their  character  depends  upon 
the  demand  for  them.  It  is  a  part  of  the  productive  proc- 
ess to  fashion  materials  to  suit  human  desires.  It  follows 
naturally,  therefore,  that  standards  are  more  readily  fixed 
in  finished  products  than  in  raw  materials.  One  elemen- 
tary principle  of  large-scale  production  is  the  establish- 
ment of  standards,  of  uniform  methods  in  production. 
This  is  an  essential  difference  between  raw  materials  and 
finished  products  so  far  as  the  analysis  goes.  It  is  also 
clear  that  market  influences  will  be  felt  more  quickly  and 
to  a  far  greater  extent  in  manufactured  products  than  in 
raw  materials. 

Market  analysis  is  even  more  important  in  the  case  of 
finished  products  than  of  raw  materials.  It  is  also  much 
more  difiicult.  In  the  former  case  the  market  is  the  con- 
sumer demand  and  the  consumer  buys  in  very  small  quan- 
tities and  buys  according  to  his  individual  habits  and 
desires.  This  gives  rise  to  the  perplexing  problems  of 
retailing.     The  marketing  of  raw  materials  escapes  such 


ELEMENTS  OF  BUSINESS  ANALYSIS      341 

difficulties.  Most  of  the  work  in  market  analysis  for 
finished  products  to-day  is  centered  upon  a  study  of  the 
market  itself.  Almost  all  the  forces  are  concentrated  on 
consumer  demand,  and  the  effort  is  to  anticipate,  and  to 
guide  and  control  this  demand. 

There  is,  of  course,  a  trade  organization  connected  with 
the  marketing  of  finished  products.  Here,  too,  are  all 
the  factors  of  the  trade  organization  as  outlined  above. 
But  there  are  new  forces  in  this  field  that  are  probably  of 
dominating  importance.  Manufactured  goods  are  coming 
to  be  sold  more  and  more  under  brand  names,  trade-marks, 
and  other  methods  of  identification.  There  is  also  the 
extremely  potent  force  of  advertising  in  the  marketing  of 
finished  products  that  has  developed  into  a  vast  industry 
in  recent  years.  All  these  forces  of  offense  and  defense 
have  been  struggling  with  tremendous  energy  to  control 
the  entire  marketing  process.  This  has  resulted  in  the 
gigantic  battle  between  the  big  manufacturers,  the  big 
jobbers,  and  the  big  retailers.  Here  arise  also  the  prob- 
lems of  the  department  store,  the  chain  store,  the  mail- 
order house,  the  manufacturer's  branch,  and  the  coopera- 
tive store.  Here,  too,  is  the  attempt  to  pass  by  all  these 
and  appeal  to  the  consumer  directly.  What  are  the  ele- 
ments of  success  in  these  different  devices .''  What  is  there 
in  them  that  is  of  essential  importance.''  Which  one  will 
survive,  and  why?  What  new  forms  of  trade  organization 
will  evolve  from  this  struggle.''  These  are  general  and 
fundamental  inquiries. 

It  may  be  seen  from  this  analysis  that  there  are  the  same 
three  general,  fundamental,  but  obvious,  problems  con- 
nected with  the  marketing  of  finished  products  that  were 
discovered  in  the  marketing  of  raw  materials.  In  this 
field,   too,   there   are   certain  questions   of  prime   impor- 


342  COMMERCIAL  RESEARCH 

tance.  One  of  these  is  the  price  problem.  This  subject  is 
shot  through  and  through  with  business  tradition.  Take 
the  giving  of  discounts,  for  an  example.  How  many  mer- 
chants or  manufacturers  have  really  analyzed  this  prob- 
lem? What  is  the  fundamental  basis  of  discounts?  Are 
discounts  really  essential  in  modern  business?  Why? 
What  does  the  discount  system  cost?  Wliat  is  the  proper 
per  cent  and  what  is  the  proper  length  of  time  for  dis- 
counts? In  other  words,  what  is  the  philosophy  of  busi- 
ness discounts? 

Involved  in  this  question  of  price  there  is  also  the  credit 
problem.  Almost  a  complete  science  may  be  developed  on 
this  subject.  It  has  its  fundamental  laws  and  principles 
that  are  essential  to  success  and  that  must  inevitably  pre- 
vail in  the  course  of  time.  What  is  the  essential  duty  of 
the  credit  man?  What  is  to  be  his  relation  to  the  busi- 
ness organization?  What  his  training,  his  powers,  his 
methods?  What  is  the  relation  of  the  commodity  and  its 
market  and  its  trade  organization  to  the  credit  problem? 
Credit  that  is  to  be  safely  offered  must  be  based  upon 
sound  business  principles,  that  are  nothing  more  or  less 
than  a  proper  application  of  the  discoveries  of  commercial 
research. 

Another  part  of  the  price  problem  is  maintained  or 
fixed  price.  This,  too,  is  fundamental  and  far-reaching 
in  the  marketing  of  finished  products.  Here,  again,  there 
is  evidence  of  the  struggle  to  control  the  consumer  market 
or  rather  to  control  goods  until  they  reach  the  hands  of 
the  consumer.  This  fixed  or  maintained  price  is  not  a  sim- 
ple or  even  a  single  problem.  With  it  are  combined  all  the 
complex  problems  of  branded  goods,  of  trade-marks,  of 
advertising,  of  market  control,  of  legal  rights  and  com- 
mercial rights,  of  long-run  policies,  and  of  business  ethics. 


ELEMENTS  OF  BUSINESS  ANALYSIS      343 

These  elements  permeate  the  entire  marketing  problem ; 
they  are  not  confined  to  any  single  commodity  or  any 
group  of  commodities.  They  are,  therefore,  in  every  sense 
fundamental. 

Another  phase  of  this  entire  subject  is  the  question  of 
dealer  influence.  The  strategic  point  in  marketing  fin- 
ished products  is  the  crucial  moment  of  sale.  When  the 
consumer  gives  or  refuses  to  give  his  consent,  who  holds  the 
dominating  influence  —  the  manufacturer,  the  merchant, 
or  the  consumer  .f'  Popular  advertising  seeks  to  make  the 
consumer  independent  of  the  dealer.  He  goes  to  the  store 
with  his  mind  made  up  as  to  the  brand  of  goods  he  will 
buy  and  the  price  he  will  pay.  But  in  some  cases  the 
dealer  becomes  an  expert  whose  advice  in  the  purchase  is 
sought  by  the  consumer.  There  are  those  who  argue  that 
the  retailer  dominates  the  situation  at  this  important  mo- 
ment. Some  say  it  is  the  will  of  the  consumer  that  pre- 
vails. Others  claim  that  the  tremendous,  almost  irresist- 
ible, force  of  national  advertising  stimulates  the  desires 
and  directs  the  will  of  the  consumer.  What  is  the  truth 
of  the  matter.''  This  query,  also,  runs  to  the  very  essence 
of  the  marketing  problem. 

There  is  the  further  problem  of  the  new  type  of  retailer. 
Business  men  have  only  begun  to  study  the  rise  of  the 
department  store  in  order  to  find  out  what  points  of 
strength  it  has  and  what  its  weaknesses  are.  Funda- 
mentally the  department  store  is  seeking  the  advantages  of 
large-scale  buying  and  large-scale  selling.  This  is  in  line 
with  the  development  of  machine  industry  in  production, 
with  the  rise  of  big  business  and  corporate  forms  of  organ- 
ization. Will  this  new  type  of  retailer  be  able  to  supplant 
the  regular  retailer?  Will  he  be  able  to  combine  within 
himself  many  of  the  marketing  functions,  such  as  whole- 


344  COMMERCIAL  RESEARCH 

saling,  financing,  storing,  and  retailing?  Will  merchan- 
dising become  more  and  more  centralized  in  such  institu- 
tions as  the  department  store?  Must  this  type  of  retail 
establishment  be  confined  to  certain  kinds  of  commodities, 
or  is  it  without  limit  as  to  the  quantity  and  character  of 
the  product  which  it  can  handle?  Where,  after  all,  does 
it  fit  into  the  scheme  of  things?  These  are  queries  which 
investigation  must  answer,  and  they,  too,  are  fundamen- 
tally important. 

The  chain  store  is  another  new  type  of  retailer  that  has 
had  a  most  remarkable  development  in  recent  years.  The 
principle  upon  which  it  is  based  is  to  secure  all  the  advan- 
tages of  large-scale  buying  together  with  all  the  advan- 
tages of  small-scale  selling.  The  chain  system  may  do  its 
own  wholesaling,  it  may  even  reach  back  to  the  source  of 
its  raw  materials  and  own  or  control  factories.  It  is  able 
to  establish  retail  stores  at  the  most  convenient  points 
for  the  consumer,  and  it  may  be  able  to  maintain  personal 
contact  with  him.  Does  this  type  of  retailer  show  certain 
advantages  over  the  department  store,  which  will  enable  it 
to  displace  that  organization?  What  are  its  weaknesses 
and  its  elements  of  strength?  What  about  the  future 
trade  organization,  if  the  chain  store  continues  to  develop 
as  it  has  developed  in  recent  years?  These,  too,  are 
queries  which  cause  great  concern  among  the  old  type  of 
retailers,  for  there  is  brought  into  business  a  new  kind 
of  force  which  must  be  reckoned  with. 

The  power  of  the  mail-order  house  is  well  known  and  is 
generally  feared,  especially  in  rural  communities.  Like 
the  chain  store,  it  has  had  a  remarkable  growth  in  recent 
years.  It  differs  in  principle  from  the  department  store 
and  the  chain  store  in  that  it  seeks  to  concentrate  and  to 
integrate  the  entire  business  process.     Like  the  depart- 


ELEMENTS  OF  BUSINESS  ANALYSIS      345 

ment  store,  it  concentrates  under  one  organization  and  in 
one  I'ocality  the  wholesaling  and  retailing.  Like  the  chain 
store,  it  desires  to  keep  personal  contact  with  the  con- 
sumer and  is  willing  to  sell  in  small  lots  to  a  wide  market. 
It,  too,  has  combined  with  retailing  the  function  of  whole- 
saling and  to  some  extent  the  process  of  manufacturing. 
What  is  the  future  of  this  type  of  wholesaler?  Is  there 
any  limit  to  the  character  of  commodities  which  it  may 
h'andle?  Will  it  finally  dominate  in  all  the  rural  markets? 
Will  it  make  inroads  into  the  great  trade  centers?  What 
are  its  weaknesses  and  what  are  its  elements  of  strength? 
At  the  head  of  these  great  marketing  institutions  are  clever 
and  progressive  merchants  who  are  devoting  all  their  skill 
and  all  their  cleverness  to  the  development  of  these  new 
methods  of  doing  business.  What  is  to  be  the  effect  of 
this  new  force  upon  the  existing  system  of  marketing 
finished  products?  There  can  be  no  question  of  the  wide- 
spread importance  of  such  inquiry. 

These  three  types  of  retailer  probably  combine  all  the 
elements  of  the  marketing  problem.  There  have  been  at- 
tempts to  establish  the  manufacturer's  branch  stores,  but 
this  is  only  a  modification  of  the  chain  store.  There  have 
been  attempts  at  cooperation,  but  for  the  most  part  these 
have  been  limited  to  small  communities  or  to  the  marketing 
of  food  products.  The  real  struggle  is  between  the  large 
retailers  designated  here  as  the  new  types  of  retailer. 

There  is  another  side  to  the  marketing  problem  which  is 
being  emphasized  more  and  more  in  late  years.  The  manu- 
facturer has  for  a  long  time  recognized  the  tremendous 
importance  of  his  labor  problem.  The  selection  and  train- 
ing of  his  workmen  have  been  a  burden  on  his  soul.  But 
it  is  being  recognized  more  and  more  clearly  to-day  that 
the  merchant  also  has  his  labor  problem.     Only  a  mail- 


346  COMMERCIAL  RESEARCH 

order  house  can  dispense  with  a  sales  force.  The  problem, 
therefore,  of  selecting,  training,  and  organizing  the  sales 
force  both  within  the  store  and  in  the  field  is  a  very  gen- 
eral one.  With  the  merchant  there  is  the  task  of  selecting 
men  to  go  out  and  represent  his  business  to  the  world. 
Salesmen  have  great  power  to  make  or  to  mar  one's  busi- 
ness. They  are  the  personal  representatives  of  that  busi- 
ness wherever  they  go.  Quite  apart,  then,  from  the  human 
element  of  personal  contact  with  the  consumer,  the  mer- 
chant must  also  contend  with  the  human  element  of  the 
temperamental  sales  force  both  within  and  without  his 
establishment. 

And  even  a  catalogue  house  must  reach  its  prospective 
customers  through  some  kind  of  medium.  The  sales-letter 
problem  and  the  catalogue-making  problem  require  a  mas- 
tery of  business  English  beyond  that  needed  in  almost  any 
other  line.  It  is  nevertheless  true  that  all  forms  of  busi- 
ness have  a  correspondence  problem.  What  are  the  prin- 
ciples of  business-letter  writing?  How  can  one  be  sure 
beforehand  that  his  sales  letter  will  be  successful?  Surely 
the  basis  for  success  here,  as  elsewhere,  is  to  be  found  in  the 
analysis  proposed  above ;  that  is,  in  a  knowledge  of  the 
commodity,  a  knowledge  of  the  market,  and  a  thorough 
understanding  of  the  trade  organization. 

In  one  form  or  another,  these  are  the  problems  every 
business  man  will  meet.  How  can  he  know  his  business 
well  enough  to  solve  them?  That  is  the  main  issue.  It 
may  well  be  that  the  answer  is :  He  cannot  do  it  for  him- 
self. An  expert  may  be  required.  But  every  one  can  do 
far  more  than  he  is  doing  to-da}'  by  a  careful  and  com- 
prehensive study  of  his  problems.  The  first  step  toward 
getting  the  material  out  of  which  the  solution  for  most  of 
these  problems  is  to  come  may  be  taken  by  any  intelligent 


ELEMENTS  OF  BUSINESS  ANALYSIS      347 

manufacturer  or  merchant.  It  means  simply  the  keeping 
of  intelligible  records  and  the  collection,  analyzing,  and 
interpretation  of  pertinent  and  essential  facts. 

Herein  may  be  illustrated  the  dividing  line  between  the 
general  principle  and  the  unique  problem  of  each  business. 
The  law,  the  rule,  the  principle  is  general.  The  facts  are 
unique,  are  individual.  It  is,  of  course,  the  most  difficult 
problem  of  all  to  see  the  general  rule  behind  the  unique 
facts.  Useless  records  are  only  a  burden  and  clog  up  the 
shelves.  Facts  to  be  useful  must  be  collected  for  a  pur- 
pose, and  that  purpose  should  be  the  solution  of  some  of 
the  fundamental  problems  indicated  above.  Suppose  it  is 
the  first-mentioned  problem  —  the  analysis  of  the  com- 
modity. Much  may  be  learned  from  the  historical  records 
of  its  development,  the  source  of  its  raw  materials,  their 
abundance  or  scarcity,  their  treatment  in  manufacturing, 
the  skill,  the  art,  the  care  in  its  workmanship,  the  improve- 
ment in  form  or  texture,  and  all  the  reasons  therefor. 
Such  a  background  will  enable  the  manufacturer  or  mer- 
chant to  take  up  his  problem  philosophically  for  the  analy- 
sis of  its  relation  to  human  wants.  After  all,  every  great, 
successful  business  man  must  be  a  philosopher.  Business 
philosophy  is  nothing  more  than  the  application  of  gen- 
eral principles  to  individual  and  concrete  problems.  This 
is  the  ultimate  goal  of  business  research. 

The  stories  of  romantic  success  in  business  have  often- 
times developed  from  such  analysis  as  has  been  suggested 
here.  Take,  for  example,  tlie  great  automobile  industry. 
There  was,  as  many  men  knew,  a  widespread  demand  for  a 
horseless  vehicle.  This  vehicle  must  displace  the  wagon 
and  the  carriage  and  therefore  must  be  able  to  fulfill  the 
uses  of  these  conveyances.  The  organization  for  selling 
such  a  commodity  already  existed  in  the  handling  of  car- 


348  COMMERCIAL  RESEARCH 

riages,  wagons,  bicycles,  and  so  forth.  Even  a  superficial 
analysis  would  show,  therefore,  that  the  essential  problem 
was  a  mechanical  one.  The  first  thing  needed  was  a 
dependable  machine  that  would  actually  run.  Until  this 
need  was  met,  the  industry  was  at  a  standstill.  The  his- 
tory of  the  automobile  will  show  that  immediately  upon 
the  solution  of  this  mechanical  problem  began  its  mar- 
velous growth. 

The  very  same  thing  is  true  of  the  farm  tractor.  In- 
dustry in  the  cities  drew  from  the  farms  the  labor  force, 
leaving  a  vacuum  to  be  filled  by  machines.  There  was  the 
obvious  demand,  there  was  the  existing  trade  organization, 
the  commodity  awaited  only  the  solution  of  a  mechanical 
problem.  Another  instance  is  the  case  of  the  hot-water 
bottles.  These  commodities  of  American  make  are  said  to 
have  invaded  the  British  market  in  spite  of  the  fact  that 
Great  Britain  manufactures  them  herself  in  great  quan- 
tities. Why.''  The  explanation  given  is  that  American 
ingenuity  devised  one  added  convenience  which  met  a  very 
distinct  and  widespread  need  and  enabled  the  American 
manufacturer  to  sell  in  the  British  market.  British  and 
American  hot-water  bottles  were  made  of  the  same  mate- 
rial, they  were  of  the  same  shape,  and  had  the  same  kind  of 
stopper,  but  the  American  bottle  was  fitted  up  with  a  ring 
in  the  bottle  which  enabled  one  to  hang  up  the  hot-water 
bottle  on  a  hook  so  that  it  quickly  dried.  This  was  the 
Yankee  touch.  The  consumer  recognized  this  added  con- 
venience and  bought  the  American  bottle. 

Classifying  Commodities.  If  the  principle  is  sound  that 
the  character  of  the  trade  organization  depends  upon  the 
character  of  the  commodity  and  the  nature  of  the  demand 
for  it,  it  may  well  follow  that  a  study  of  the  relationship 
between  a  commoditv  and  its  demand  is  the  most  funda- 


ELEMENTS  OF  BUSINESS  ANALYSIS      349 

mental  investigation  that  can  be  made.  In  this  case  it  is 
necessary  to  find  some  kind  of  classifica»tion  of  commodi- 
ties in  relation  to  the  demand  for  them  in  order  that  one 
may  study  more  intelligently  the  essential  character  of  the 
organization.  Most  classifications  are  rather  vague  and 
indefinite  in  character.  Some  goods  are  said  to  be  staple 
commodities.  Illustrations  of  this  type  are  wheat,  cotton, 
wool,  sugar,  flour,  meat,  and  so  on.  When  one  examines 
the  qualities  of  these  goods,  he  finds  they  are  of  very  differ- 
ent kinds.  What  is  there  common  in  the  group  which  en- 
ables one  to  put  them  in  the  same  class.''  Some  obvious 
things  they  have  in  common.  They  are,  for  example,  es- 
tablished in  the  market.  The  demand  for  them  is  every- 
where. No  standard  of  living  is  too  low  to  include  them  as 
necessary  of  life.  This  one  quality  may  be  enough  to  clas- 
sify them  as  staples,  but  beyond  this  it  is  true  that  they 
have  accepted  standards  of  grading  which  every  one  is  sup- 
posed to  know  or  can  apply.  In  any  case,  these  are  the 
types  and  these  are  the  qualities  of  the  goods  called  staples. 
The  essential  commercial  factor  in  connection  with  them 
is  that  since  everybody  must  have  them,  it  is  price  that 
counts. 

In  the  line  of  food  products  another  class  of  goods  is 
called  the  fancy  products.  There  is,  for  example,  the 
fancy  grocery  store  that  handles  the  less  common  goods. 
These  are  higher  in  price  and  are  bought  by  exceptional 
purchasers  or  by  ordinary  purchasers  on  extraordinary 
occasions.  In  this  case  quality  of  the  product  begins  to 
dominate  the  price.  There  is  a  social  distinction  in  being 
able  to  buy  these  goods  and  for  this  distinction  people  are 
willing  to  pay  the  price  without  question.  Exotic  fruits, 
extra-price  teas,  foodstuffs  imported  from  far  away,  are 
examples  of  this  class  of  commodity. 


350  COMMERCIAL  RESEARCH 

There  is  another  class  of  goods  on  this  same  basis  called 
the  specialties.  This  is  confined  to  a  narrower  group  of 
consumers  with  whom  price  is  a  very  small  consideration. 
They  will  have  what  they  want  regardless  of  the  cost,  and 
dealers  in  goods  of  this  kind  are  constantly  catering  to  the 
whims  and  desires  of  those  who  have  much  money  to  spend. 
Very  rare  articles  in  the  food  line  or  in  style  goods  would 
belong  to  this  group. 

On  the  basis  of  this  classification  one  may  consider  the 
trade  organization  that  has  grown  up  to  handle  these 
goods.  Staple  commodities  are  not,  and  cannot,  be  con- 
centrated within  a  trade  center.  They  are  carried  by  the 
thousands  of  small  retailers  located  in  rural  districts,  in 
the  outskirts  of  the  city,  in  the  secondary  markets  and 
suburbs  of  the  large  trading  centers.  Old-line  retailers 
handle  these  commodities  in  the  old-fashioned  way.  In 
fancy  goods  and  in  specialty  goods  it  will  be  found  that 
the  trade  is  concentrated.  There  are  only  a  few  stores, 
and  these  are  in  the  center  of  the  shopping  district. 
There  is  usually  no  bargaining,  and  the  purchaser  does  not 
ask  to  see  more  than  one  line  of  goods  for  the  sake  of  com- 
paring prices  and  quality.  The  fancy  grocery  store,  for 
example,  is  in  the  very  midst  of  the  shopping  center  along 
with  other  high-priced  goods.  There  is  quite  a  distinct 
tendency  in  the  handling  of  fancies  or  specialties  toward 
monopol3\  This  is  not  true  and  cannot  be  true  of  staple 
goods.  The  manufacturer  of  a  breakfast  food,  for  in- 
stance, demands  that  his  product  shall  go  to  the  old  type 
of  retailer  because  he  must  have  thousands  of  stores  con- 
veniently located  throughout  all  parts  of  the  country  that 
handle  his  commodity.  It  may  be  thus  seen  that  even  on 
such  a  general  vague  basis  for  classification  as  this,  the 
different  types  of  trade  organization  have  grown  up. 


ELEMENTS  OF  BUSINESS  ANALYSIS      351 

From  another  point  of  view  commodities,  particularly 
manufactured  goods  that  are  for  individual  consumption, 
fall  likewise  into  three  general  classes.  There  are,  first, 
t'he  emergency  goods.  These  are  goods  that  are  demanded 
suddenly  and  unexpectedly.  They  are  best  illustrated  by 
the  supplies  carried  in  the  drug  store.  Under  modern 
city  conditions  some  groceries  may  be  classed  here  as,  for 
instance,  milk,  or  bread,  or  butter,  when  sudden  demand 
for  them  arises. 

Another  type  of  goods  on  this  basis  of  classification  is 
called  convenience  goods.  These  are  articles  of  daily  pur- 
chase that  are  relatively  insignificant  in  value  and  are  for 
immediate  use.  Under  this  class  would  fall  such  goods  as 
notions,  candies,  groceries,  children's  stockings,  house 
dresses,  and  so  on.  These  commodities  are  bought  at  the 
most  convenient  place.  There  is  practically  no  element 
of  style  connected  with  them.  They  arc  bought  for  serv- 
ice, not  for  distinction.  Where  there  is  any  comparison 
of  values,  it  is  on  the  basis  of  durable  quality  and  sub- 
stantial workmanship. 

The  third  class  of  goods  from  this  point  of  view  is  called 
the  shopping  line.  These  are  the  more  important  goods 
for  the  household  or  for  individual  use.  Tliey  are  bought 
only  at  intervals,  perhaps  only  once  or  twice  a  year,  or 
possibly  only  once  or  twice  in  a  lifetime.  These  purchases 
require  considerable  thought  on  the  part  of  the  consumer. 
They  may  be  delayed  for  some  time  until  a  more  conven- 
ient opportunity  arrives.  Usually  such  purchases  mean  a 
considerable  item  of  expense  in  the  family  budget.  Into 
this  class  would  fall  such  goods  as  furniture,  rugs,  suits, 
dress  goods,  and  so  on. 

There  is  some  evidence  to  show  that  each  of  these  classes 
of  goods  has  developed  its  own  means  of  distribution  and 


352  COMMERCIAL  RESEARCH 

has  developed  to  a  great  extent  the  location  of  its  distrib- 
uting plants  in  direct  relation  to  the  demand  of  the  con- 
sumer. "  Woman  is  a  shopper,"  says  one  writer  on  this 
subject,  "hence  the  department  store."  This  means  that 
the  department  store  has  for  its  foundation  a  shopping  line 
of  goods.  It  is  generally  claimed  to-day  that  this  new 
type  of  retailer  grew  out  of  the  textile  business.  It  is  this 
line  of  shopping  goods,  therefore,  that  accounts  for  the  de- 
partment store,  determines  its  character,  and  directs  its 
development.  The  merchant  or  manufacturer  who  is  en- 
gaged in  business  investigation  should  examine  carefully 
the  foundations  upon  which  such  claims  are  based.  If 
the  department  store  demands  for  its  successful  existence 
a  shopping  line  of  goods,  does  this  fact  likewise  limit  the 
character  of  goods  that  may  be  handled  by  such  a  store.'' 
There  is,  for  instance,  the  grocery  department  in  many  of 
the  large  department  stores.  Can  these  be  permanently 
successful.''  Could  cigars  be  sold  successfully  by  a  de- 
partment store.?  Neither  of  these  commodities  are  to  be 
classed  as  a  shopping  line. 

Emergency  goods  must  be  carried  so  near  the  consumer 
that  he  may  instantly  turn  to  them  in  time  of  crisis,  con- 
fidently expecting  to  find  there  what  his  case  demands. 
The  type  of  trade  organization  represented  by  the  drug 
store  has  risen  in  answer  to  this  need.  One  expects  to  find 
a  drug  store  on  the  most  conspicuous  corners  of  the 
streets ;  he  expects  it  to  be  open  for  long  hours ;  he  also 
expects  that  it  be  permanently  lighted  and  identified  in 
some  way  so  that  it  may  not  be  mistaken.  On  the  other 
hand,  the  question  naturally  arises:  Is  the  drug  store 
limited  in  the  character  of  goods  which  it  may  handle? 
Must  its  entire  stock  consist  of  emergency  goods?  When 
one  considers  the  countless  variety  of  commodities  found 


ELEMENTS  OF  BUSINESS  ANALYSIS      353 

in  the  modern  drug  store,  he  will,  of  course,  doubt  the 
existence  of  any  limitation.  This  question,  however,  de- 
mands careful  attention  from  the  manufacturer  and  the 
merchant.  It  may  be  that  there  is  a  fundamental  and  a 
determining  economic  principle  involved  in  this  classifi- 
cation. 

Goods  of  the  convenience  type,  as  the  name  implies,  must 
be  carried  by  those  retail  establishments  which  find  their 
location  at  the  place  that  is  most  convenient  for  the  con- 
sumer. Scattered  through  the  residence  district  of  the 
larger  cities  will  be  found  these  stores  filled  with  conven- 
ience goods.  The  5^  and  10^  stores,  notions  and  novelty 
stores,  the  hardware  stores,  the  cigar  stores  and  the 
grocery  stores  give  evidence  of  the  fact  that  there  is  a 
principle  at  work  in  this  case.  Again  the  question  arises : 
Must  these  stores  be  confined  to  convenience  goods.''  Can 
they  not  develop  other  lines  so  that  shopping  goods  are 
carried  under  the  same  roof  with  convenience  and  emer- 
gency goods.''  How  far  this  principle,  if  it  is  a  true  eco- 
nomic principle,  limits  the  activities  of  the  merchant,  is  a 
question  for  critical  study  on  his  part. 

Scientific  Analysis.  Much  aid  will  certainly  be  derived 
in  the  near  future  from  the  movement  for  industrial  and 
commercial  research.  Accurate  business  facts  will  tend 
immediately  to  modify  or  to  establish  these  fundamental 
principles  of  business  analysis.  A  further  inquiry  into  the 
essential  character  of  goods  will  afford  a  sounder  basis  for 
judging  them  commercially.  There  is  yet  a  vast  field 
that  is  undeveloped  in  the  study  of  commodities  in  their 
relationship  to  human  wants.  Heretofore  business  tra- 
dition has  been  dominant  in  this  field.  It  is  believed  that 
much  good  will  be  derived  from  military  needs  by  the  busi- 
ness man.     A  single  illustration  will  prove  this  point. 


354  COMMERCIAL  RESEARCH 

In  spite  of  the  clever  words  of  the  great  Napoleon,  it 
still  remains  true  as  an  actual  fact  that  an  army  marches 
on  its  feet.  For  a  long  time  it  has  been  recognized  in  a 
general  way  that  the  soldiers  must  be  cared  for  in  this 
regard.  In  the  United  States,  however,  no  considerable 
movement  has  gained  headway  to  take  up  this  matter  in 
any  careful  or  scientific  manner.  Only  very  recently  the 
government  decided  to  make  an  investigation  into  this 
subject.  "  A  series  of  studies  of  soldiers'  feet  and  the 
proper  fitting  of  shoes  has  just  been  completed  by  a  staff 
of  officers,  enlisted  men,  expert  shoe  men,  and  military 
orthopedists,  under  the  direction  of  the  Quartermaster 
General  and  the  Surgeon  General.  The  experiments  and 
tests  which  covered  a  period  of  many  months  and  a  number 
of  camps  and  cantonments  were  thorough  and  complete 
and  resulted  in  changes  and  improvements  that  will  mean 
added  comfort  and  marching  power  to  the  army."  (The 
Official  Bulletin.) 

Careful  tests  of  this  kind  have  revealed  the  fact  that 
two  out  of  every  one  thousand  men  have  had  to  have  their 
shoes  made  to  order.  Results  have  also  made  it  necessary 
to  change  the  style  and  size  of  the  shoe  worn  in  the  army. 
Formerly  the  standard  shoe  was  called  a  7-E,  but  the 
special  tests  revealed  the  fact  that  the  average  size  of  the 
marching  shoes  should  be  Sy^-T),  while  the  average  size  of 
the  field  shoes  should  be  9-E.  Other  tests  of  similar  char- 
acter seemed  to  show  that  the  men  in  the  present  army  are 
larger  than  those  serving  in  previous  wars.  The  records 
in  the  Quartermaster  General's  office  show  that  require- 
ments average  about  a  full  size  larger  in  all  outer  clothing 
worn  by  the  soldiers.  Records  of  this  sort  should  be 
made  available  to  the  merchant  and  should  prove  of  great 
practical   value   to   him.     It   may   be   hoped    that   a   by- 


ELEMENTS  OF  BUSINESS  ANALYSIS      355 

product  of  the  present  war  may  be  a  more  scientific  ad- 
justment of  commodities  to  human  needs. 

Conclusion.  This  discussion  has  aimed  to  survey 
briefly  some  fundamental  principles  which  should  guide  in 
the  making  of  any  kind  of  business  analysis.  With  an 
increased  knowledge  of  facts,  these  generalizations  may 
be  modified  from  time  to  time,  but  it  is  believed  that  in 
essence  they  are  true.  In  any  case,  they  should  prove 
helpful  as  guides  or  laboratory  directions  in  beginning  the 
work  of  commercial  research.  They  should  not  be  ac- 
cepted, of  course,  without  careful  examination,  and  they 
should  be  constantly  tested  by  the  facts  secured.  Never- 
theless, in  all  careful  experimenting,  it  is  necessary  to 
begin  with  some  kind  of  hypothesis.  Let  the  principles 
stated  here  serve  as  the  hypothesis  in  business  research. 


CHAPTER  XII 


THE    NEW    BUSINESS 


War  business  —  Business  changes  —  Persistent  phases  of  business 

—  A  new  spirit  —  Centralization  of  control  —  Standards  of  business 

—  The  emotional  appeal  —  The  expanded  horizon  —  Mobilized  labor 

—  Mobilized  industry  —  New  legislation  —  New  aims  of  organiza- 
tion —  The  corporation  —  Better  organization  —  Control  of  essential 
resources  —  Socialization  of  industry  —  Productive  capacity  of  a 
people  —  More  intelligent  business  —  Conclusion. 

There  are  indications  on  every  hand  that,  in  political, 
social,  and  business  life  we  are  now  living  in  a  period  of 
transition.  Many  new  forces  have  been  unleashed  and 
are  at  work  to  modify  in  a  more  or  less  fundamental  way 
the  entire  structure  of  modern  society.  In  an  address  to 
a  group  of  business  leaders,  a  few  years  ago,  the  Presi- 
dent of  the  United  States  said:  "  We  are  in  the  presence 
of  a  new  organization  of  society.  Our  life  has  broken 
away  from  the  past.  The  life  of  America  is  not  the  life 
that  it  was  ten  years  ago.  We  have  clianged  our  eco- 
nomic conditions  absolutely  from  top  to  bottom,  and  with 
our  economic  society,  the  organization  of  our  life."  {The 
New  Freedom;  p.  3.) 

These  significant  words  were  spoken  prior  to  the  epoch- 
making  events  of  1914-1918.  All  the  forces  for  change 
that  were  then  seen  at  work  have  been  greatly  intensified 
under  drastic  pressure.  Social  problems,  political  prob- 
lems, economic  problems,  in  forms  old  and  new,  are  still 
demanding  immediate  solution.  To-day,  the  settlements 
that  business  men  have  postponed  to  a  more  convenient 

356 


THE  NEW  BUSINESS  857 

season  will  no  longer  be  deferred ;  they  must  be  met ;  they 
must  be  met  honestly  and  frankly,  and  they  must  be  set- 
tled satisfactorily. 

In  the  making  of  these  settlements,  in  the  solving  of 
these  problems,  new  adjustments  will  be  required.  It  is 
out  of  these  readjustments  that  the  new  business  will  arise. 
What  will  be  the  character  of  this  new  business  ?  In  what 
fundamental  respects  will  it  differ  from  the  business  of  yes- 
terday ? 

War  Business.  In  the  years  preceding  1915  there  was 
every  indication  in  the  business  circles  of  the  United  States 
that  the  country  was  headed  for  a  period  of  depression. 
For  two  years  and  more  wheels  of  industry  had  been  slow- 
ing down.  Profits  were  greatly  decreased  and  unemploy- 
ment was  on  the  increase.  Manufacturers  kept  their 
plants  going  only  in  order  to  meet  heavy  overhead  ex- 
penses. Merchants  struggled  to  move  the  goods  from 
their  shelves.  Everywhere  there  was  business  discourage- 
ment and  business  gloom. 

Into  the  midst  of  this  situation  came  the  overwhelming 
force  of  a  war  demand.  Foodstuffs,  war  materials,  muni- 
tions were  demanded  in  constantly  increasing  amounts. 
Foreign  markets  that  had  been  satisfied  with  European 
goods  found  their  supply  suddenly  cut  off.  They  turned 
to  the  United  States  for  help  and  added  theirs  to  the  war 
demand  for  American  goods.  In  a  brief  time  the  entire 
tone  of  business  was  changed.  Pessimists  became  opti- 
mists. Factories  reopened  and  increased  their  pay  roll; 
orders  piled  in  upon  them ;  unemployment  decreased ;  pur- 
chasing power  among  the  great  mass  of  consumers  in- 
creased. Merchants  felt  the  stimulation  of  business. 
Goods  moved  from  their  shelves  with  accelerating  speed. 
Our  foreign  trade  reached  heights  undreamed  of  before. 


358  COMMERCIAL  RESEARCH 

The  United  States  passed  from  the  role  of  a  debtor  nation 
and  joined  the  ranks  of  the  great  creditor  nations.  All 
signs  of  a  business  depression  vanished.  American  busi- 
ness came  under  the  control  of  a  stimulating  war  demand. 

In  1917  the  United  States  joined  the  other  great  na- 
tions of  the  world  in  the  war.  There  came  immediately  a 
warning  to  all  people  that  they  must  save.  As  early  as 
February  of  that  year  government  reports  indicated  a 
shortage  of  certain  foodstuffs.  They  asked  that  a  strin- 
gent regulation  for  the  purpose  of  conserving  foodstuffs 
should  begin  at  once.  Everywhere  the  cry  was  "  Save !  " 
For  the  first  time  the  people  of  the  United  States  felt  a 
great  new  fear,  the  fear  of  want.  In  newspapers,  in  gov- 
ernment reports,  in  advertisements,  in  public  addresses, 
and  by  word  of  mouth  the  propaganda  for  conservation 
spread  throughout  the  country.  The  effect  of  this  move- 
ment was  felt  almost  immediately.  People  ceased  to  buy 
as  they  had  been  buying;  goods  did  not  move  as  rapidly 
from  the  shelves ;  merchants  delayed  sending  in  orders  to 
jobbers  and  manufacturers.  These  latter,  in  their  turn, 
demanded  fewer  goods  and  less  raw  materials.  The  en- 
tire organization  of  business  received  a  tremendous  shock. 

Then  came  a  reaction.  The  philosophy  of  the  business 
man  began  to  be  preached  by  all ;  —  that  business  must 
go  on ;  there  must  be  "  business  as  usual."  Profit,  that 
sensitive  spot  in  all  business,  had  been  touched  by  the 
saving  propaganda.  The  country  could  not  endure  a 
return  of  depression,  stagnation,  and  unemployment. 
Somehow,  some  way,  by  force  of  will,  business  must  go  on. 
The  propaganda  was  reversed.  The  consumer  was  urged 
to  buy  as  he  was  accustomed  to  buy. 

But  business  could  not  be  as  usual.  It  is  an  obvious 
fact  that  business  cannot  go  on  as  usual  unless  demand 


THE  NEW  BUSINESS  359 

and  supply  continue  as  usual.  In  this  case  demand  was 
unusual ;  it  was  hectic ;  business  was  feverish  in  conse- 
quence. Purchases  were  necessarily  concentrated  along 
certain  definite  lines.  The  whole  movement  for  mobilizing 
industry  and  labor  was  beginning  to  take  shape.  Grad- 
ually there  arose  a  distinction  between  one  industry  and 
another ;  between  one  kind  of  business  and  another ;  men 
began  to  speak  of  "  essential  "  and  "  nonessential  "  indus- 
tries. The  whole  business  system  was  wrenched  and 
twisted  by  this  unnatural  strain  upon  it.  It  was  impos- 
sible that  business  should  go  on  as  usual. 

There  then  arose  the  question  of  price  fixing.  In  times 
of  unusual  business  strain  and  turmoil,  where  demands  are 
concentrated  and  prices  fluctuate  violently,  there  is  a  con- 
stant temptation  to  speculate.  In  times  of  war  a  great 
field  of  speculation  is  in  foodstuff's.  In  order  to  suppress 
such  a  movement  in  the  United  States,  the  government 
formed  a  Food  Administration  and  gave  to  it  the  power  of 
fixing  the  price,  wholesale  and  retail,  for  certain  essential 
foodstuff's.  For  wheat  there  was  established  a  minimum 
price,  and,  as  a  device  for  controlling  the  price  of  this 
commodity,  the  government  formed  a  business  corpora- 
tion with  a  capitalization  of  $150,000,000,^  whose  duty 
it  was  to  buy  and  sell  wheat  for  tlie  purpose  of  regu- 
lating the  price  and  thereby  preventing  speculation.  A 
meat  commission  began  its  work  to  control  the  price  of 
meat;  the  Fuel  Administration  took  up  the  question  of 
coal  prices ;  special  commissions  were  appointed  to  inquire 
into  cost  of  production  and  distribution  of  other  food- 
stuff's such  as  milk,  sugar,  flour,  etc.  Government  control 
was  thus  extended  in  a  way  never  experienced  before  in  the 

1  Since  increased  by  direction  of  the  President  to  $500,000,000. 


360  COMMERCIAL  RESEARCH 

United  States.  Many  mistakes  were  made  because  of 
inexperience  and  lack  of  knowledge  and  foresight.  The 
price  of  finished  products  was  sometimes  fixed  while  the 
raw  materials  were  left  free.  The  control  of  one  com- 
modity immediately  affected  all  allied  commodities. 
Through  all  these  new  experiences  business  continued, 
somewhat  uncertain,  but,  in  general,  prosperous. 

This  was  the  beginning  of  war  business.  What  the 
President  of  the  United  States  had  prophesied  four  or 
five  years  before  was  now  coming  to  pass  under  circum- 
stances which  he  could  not  have  foreseen.  Changes  that 
would  require  years  to  accomplish  under  normal  condi- 
tions were  produced  by  the  war  influence  overnight.  So- 
called  radical  and  socialistic  principles  were  put  into  prac- 
tice without  much  debate  and  without  serious  controversy. 
Here  and  there  arose  sharp,  brief  disputes  on  certain 
points,  but  for  the  most  part  these  were  brushed  aside  by 
the  national  demand  for  effective  control  to  accomplish  a 
common  purpose.  With  the  breaking  up  of  old  habits  of 
business,  with  the  introduction  of  new  and  untried  forces, 
it  is  inevitable  that  great  changes  will  appear  in  business. 
In  ways  that  the  business  prophets  of  the  pre-war  period 
never  suspected,  these  years  will  prove  to  be  transitional 
years. 

Business  Changes.  The  most  important  and  significant 
changes  in  the  character  of  American  business  will  be 
brought  together  here  for  the  purpose  of  analyzing  them 
in  order  that  a  fuller  appreciation  may  be  had  of  their 
tendencies.  The  constant  task  of  the  practical  business 
man  is  to  foresee  changes  and  to  prepare  his  affairs  to 
meet  them.  There  is  also  for  him  a  constant  danger  of  be- 
coming immersed  in  details  and  failing  to  get  the  broader 
view.     It  is  likely  that  many  changes  are  too  recent  to  be 


THE  NEW  BUSINESS  361 

accurately  evaluated  at  present ;  nevertheless  a  considera- 
tion of  them  will  prove  helpful. 

Among  the  most  obvious  new  forces  in  business,  there  is 
the  extension  of  government  control.  By  means  of  new 
types  of  organization,  such  as  the  Food  Administration, 
the  War  Industries  Board,  the  War  Trade  Board,  and  by 
giving  increased  power  to  other  departments  and  officials, 
the  United  States  Government  has  entered  into  business 
control  in  an  entirely  new  fashion.  A  very  short  time  ago 
governmental  control  and  operation  of  the  railroads  was 
mere  talk.  The  taking  over  and  operating  by  the  govern- 
ment of  telephones,  telegraphs,  and  cables  was  not  ex- 
pected by  the  present  generation.  Building,  owning,  and 
operating  ships  were  assumed  to  be  matters  for  private 
business  activitv,  and  yet  the  government  has  done  them 
all. 

Attached  to  all  of  these  changes,  to  be  sure,  has  been 
the  phrase  "  for  the  period  of  the  war  " ;  but  business  men 
are  not  convinced  that  the  old  status  will  or  can  return. 
Many  of  them  found  themselves  caught  in  the  dilemma  of 
greatly  desiring  effective,  centralized  control  in  order  to 
carry  on  the  war  to  a  speedy,  successful  conclusion  and  of 
greatly  fearing  that  this  very  success  would  tend  to  per- 
petuate government  control.  Released  from  the  dilemma 
by  the  happy  ending  of  the  struggle,  they  have  reacted 
strongly  against  governmental  restraints.  It  seems  prob- 
able that  here,  as  in  all  doubtful  issues,  the  result  will  be  a 
compromise. 

Other  new  phases  of  business  are  numerous.  Costs  of 
production  have  been  examined  in  a  way  not  known  before. 
Profits  in  business  have  been  limited  in  an  entirely  new 
fashion.  Prices  have  been  "  suggested  "  by  government 
officials  with  a  force  never  experienced  by  the  business  man 


362  COMMERCIAL  RESEARCH 

before.  Industry  after  industr}'^  has  been  taken  over  for 
direct  governmenta]  control  in  carrying  on  the  war;  com- 
mercial relationships  have  been  modified  so  as  to  reduce 
competition  to  a  minimum;  stocks  of  raw  materials  have 
been  limited  in  drastic  fashion ;  all  labor  has  been  con- 
trolled in  a  new  wa}^  and  for  a  common  purpose.  These 
are  some  of  the  most  obvious  outward  changes  in  business 
conditions. 

Deeper  and  more  fundamental  changes  have  taken  place, 
which  are  partly  economic  but  largely  psychological.  All 
readjustments  start  from  a  new  idea,  a  new  experience,  a 
new  mental  attitude.  Crises,  depressions,  booms,  panics, 
like  social  revolutions,  arc  composed  to  a  great  extent  of 
the  stuff  that  dreams  are  made  of  —  ideas,  suggestions, 
rumors  that  run  from  lip  to  lip  and  are  nurtured  in  the 
minds  of  the  multitude.  It  is  not  possible,  for  instance, 
to  estimate  the  economic  effect  of  an  unprecedented  in- 
crease in  wages.  The  sense  of  greater  power,  the  feeling 
of  enhanced  worth,  of  greater  well-being,  of  relief  from 
the  fear  of  want,  will  go  deep  into  the  essence  of  social, 
political,  and  economic  society. 

There  are,  too,  the  after-effects  of  international  cooper- 
ation. Americans  have  associated  in  common  tasks  with 
foreign  peoples.  They  have  matched  their  wits  with  the 
veterans  of  Europe  in  strategy,  finance,  and  bargaining. 
American  business  methods  have  met  European  methods. 
There  has  been  the  give  and  take,  the  thrust  and  parry  that 
is  characteristic  of  every  contest.  Business  men  of  Amer- 
ica have  had  to  ask  and  to  give.  In  the  years  to  come 
these  actions  will  grow  into  heroic  j)roportions,  though  in 
actuality  the  human  element  —  to  give  it  no  worse  name  — 
has  been  rather  too  strong  for  unmixed  admiration.  The 
fact    is    that    American    business    has    learned    and    has 


THE  NEW  BUSINESS 

taught  others.     Here,  too,  are  effects  of  practical  issue. 

Some  of  these  forces  are  sapping  at  the  very  foundation 
of  modern  economic  structure.  Two  of  the  corner  stones 
of  that  structure  are  contract  and  private  property. 
With  more  freedom  than  ever  before  men  are  expressing 
their  doubts  as  to  the  sacredness  of  both  of  these.  This 
may  possibly  be  a  passing  phase,  the  result  of  seeing  and 
being  party  to  the  disregard  of  these  things  under  the 
overtowering  demands  of  war.  The  attitude,  however,  is 
here  and  is  to  be  reckoned  with. 

American  business  is  now  international.  Manufac- 
turers and  merchants  are  forced  to  think  in  terms  of  the 
world  market.  That  artificial  barrier,  a  political  bound- 
ary, cannot  stop  the  demands  of  trade.  A  vacuum  in  the 
foreign  markets  has  irresistibly  drawn  upon  the  raw  mate- 
rials and  the  manufactured  goods  of  the  United  States. 
The  work  of  the  Bureau  of  Foreign  and  Domestic  Com- 
merce, of  the  Chamber  of  Commerce  of  the  United  States, 
and  of  the  National  Foreign  Trade  Council  is  being  re- 
warded in  ways  unsuspected  and  to  an  extent  never 
hoped  for.  Here  are  new  fields  to  enter,  such  as  the  Ori- 
ent and  South  America ;  here  are  new  customers  to  study, 
new  tastes  to  please,  new  methods  of  doing  business  to 
learn.  Domestic  trade  must  inevitably  feel  the  effects  of 
an  expansion  in  foreign  trade. 

How  fundamental  these  changes  are  to  become,  how  far 
we  are  to  go  in  them,  what  new  methods  of  control  may 
be  used,  depend  upon  the  new  adjustments  from  the  strain 
of  war.  Nobody  to-day  knows.  There  is  no  method  to 
anticipate  them.  Every  indication  exists,  however,  to 
show  that  there  will  be  a  new  business.  There  always  is  a 
new  business  after  an  abnormal  period. 

Persistent  Phases  of  Business.     The  history  of  business 


364  COMMERCIAL  RESEARCH 

in  every  country  shows  a  thorny  path.  Periods  of  pros- 
perity react  with  periods  of  depression.  Under  both  of 
these  circumstances  many  changes  have  occurred.  And 
yet,  despite  all  these  fluctuations,  certain  fundamental 
elements  have  persisted.  In  one  respect  business  is  like 
the  waves  of  the  sea;  the  water  rises  and  falls  in  forming 
these  waves,  but  does  not  move  forward.  The  impulse,  the 
force  creating  the  waves,  goes  on  and  the  water  sinks  back 
in  much  the  same  position  it  held  before.  In  most  out- 
ward aspects  business  presents  the  same  kind  of  phenome- 
non. 

Unless  the  changes  that  have  appeared  so  far  are 
greatly  intensified  and  unless  there  are  some  new  forces  to 
appear,  it  may  be  safely  predicted  that  certain  phases  of 
business  will  persist.  Like  social  habits  and  political  in- 
stitutions, business  organizations  and  systems  cannot  be 
suddenly  and  completely  transformed.  Take  the  price 
system,  for  example.  All  of  our  business  is  organized 
around  this  principle.  Everything  has  its  price,  and  the 
business  man  thinks  in  terms  of  price.  Business  is  guided 
by  means  of  a  price  system.  There  is  not  yet  any  indi- 
cation that  this  system  will  be  greatly  changed  or  will  be 
discarded  altogether.  New  uses  may  be  made  of  the  sys- 
tem, new  forces  may  find  expression  through  it,  but  as  a 
system  it  will  continue  to  be. 

It  seems  also  very  probable  that  the  machine  industry, 
as  it  is  called,  will  persist.  Indeed,  the  present  indication 
is  that  this  kind  of  industry  will  be  greatly  increased. 
Machines  are  moving  to  the  farms  to  take  the  place  of 
hand  labor  there.  Under  the  general  shortage  of  work- 
men, new  kinds  of  machines  will  be  invented.  The  war  has 
been  called  by  one  great  manufacturer,  "  a  war  of  ma- 
chines."    It  is  probably  true  that  the  after-the-war  busi- 


THE  NEW  BUSINESS  365 

ness  will  be  in  a  new  and  fuller  sense  a  machine  business. 

Another  characteristic  of  business  that  seems  likely  to 
remain  is  specialization.  There  is  no  indication  to-day 
that  the  world  is  returning  to  the  so-called  primitive  con- 
dition before  the  time  of  specialized  intelligence.  On  the 
contrary,  there  is  every  reason  to  believe  that  this  charac- 
teristic of  business  will  become  more  important.  The  new 
demand  on  business  is  for  the  specialist  who  can  apply 
scientific  principles  in  certain  highly  technical  and  highly 
specialized  fields  of  endeavor. 

There  is  also  money  as  a  medium  of  exchange,  as  the 
basis  of  calculation,  as  a  means  of  accumulating  capital, 
which  seems  likely  to  persist.  There  may,  indeed,  be  new 
standards  of  money,  there  may  come  about  a  realization 
of  an  international  standard.  Credit  may  be  greatly  in- 
creased, and  yet  there  is  no  evidence  to  show  that  this 
characteristic  will  disappear  from  business. 

There  are  many  other  phases  of  modern  business  which 
might  be  mentioned ;  there  is  the  element  of  contract  which 
runs  through  all  business  relationships  to-day ;  there  is  the 
question  of  labor  which  in  some  forms  seems  likely  to  per- 
sist. There  is  every  reason  to  believe,  moreover,  that 
business  will  continue  to  run  on  the  basis  of  profits,  that 
the  business  man  will  continue  to  do  what  pays  best,  how- 
ever he  may  interpret  the  word  "  pays."  It  may  be  said 
in  general  that  without  a  thorough  breakdown  of  all  the 
industrial  and  commercial  system,  business  in  its  outward 
aspects  will  "  carry  on." 

It  might  be  hoped  that  the  new  business  would  mean  an 
elimination  of  the  indefensible  and  almost  tragic  waste  of 
American  business.  This  hope,  however,  is  altogether  too 
idealistic.  There  will  doubtless  continue  to  be  the  uneco- 
nomical location  of  factories,  of  stores,  of  warehouses,  of 


366  COMMERCIAL  RESEARCH 

an  entire  railroad  system,  and  there  will  be  the  continued 
struggle  of  these  institutions  to  maintain  themselves.  The 
great  body  of  business  men  are  too  set  in  their  ways  to 
change  greatly.  It  requires  two  or  three  generations  to 
bring  about  any  revolution  in  business  habits.  He  will  be 
an  optimist,  indeed,  who  believes  that,  like  the  fabled 
Phoenix,  a  new  business  will  spring  full-formed  from  the 
ashes  of  the  old. 

A  New  Spirit.  Permanent  changes  in  business  must 
come  slowly,  but  come  they  will.  One  can  find  to-day  evi- 
dence of  a  new  sort  of  union  among  business  men.  It 
may  be  merely  one  phase  of  what  passes  under  the  name  of 
"  cooperation."  As  a  matter  of  fact,  it  is  growing  into 
a  new  sense  of  appreciation  of  duty  and  responsibility. 
There  is  in  reality  the  forming  of  a  new  conception  of 
business  relationships.  This  goes  beyond  the  old  idea  of 
cooperation.  It  is  fostered  by  the  great  trade  associa- 
tions with  their  trade  papers  that  have  multiplied  so  fast 
in  late  years.  It  appears  also  in  the  growing  new  atti- 
tude toward  government  and  in  the  evidence  of  a  new  gov- 
ernment attitude  toward  business.  Both  of  these  will 
learn  a  great  and  useful  lesson  from  their  present  contact. 

Just  as  democracy  was  the  slogan  of  the  European 
struggle,  so  the  new  spirit  of  business  after  the  war  must 
be  a  spirit  of  democracy.  "  Our  industrial  organization," 
says  Mr.  Guggenheim,  "  must  be  democratized."  (J.  R. 
Smith;  "Industrial  Management,"  p.  271.)  The  same 
idea  has  been  expressed  by  one  of  the  great  labor  leaders. 
This  period  of  trial  should  bring  these  two  parties  to- 
gether on  some  common  basis  of  democratic  policy.  It  is 
hoped  and  it  is  believed  that  this  will  prove  true. 

The  lack  of  democracy  in  business  is  not  confined  to  the 
large  factories.     It  has  been  a  common  element  in  all  kinds 


THE  NEW  BUSINESS  367 

of  business.  The  autocrat  has  been  in  the  office  as  well  as 
in  the  shop.  He  is  no  less  dictatorial  in  one  place  than 
in  the  other.  All  of  this  must  pass  away.  There  must 
appear  in  its  place  what  has  been  called  "  the  representa- 
tive system  in  business."  "  To  the  student  of  marketing, 
indeed,  the  whole  foundation  of  merchandising  is  being  af- 
fected by  this  change  from  a  purely  disciplinary  system  to 
a  partly  representative  one."  (Harry  Tipper,  "  The  New 
Business,"  p.  331.)  Evidence  of  this  change  may  be  seen 
in  such  gatherings  as  the  Saturday-morning  meetings  of 
salesmen  in  the  home  office,  in  the  round-table  discussions 
in  various  types  of  business,  in  the  rapid  development  of 
welfare  work  among  employees,  in  the  movement  for  arbi- 
tration of  all  kinds  of  disputes. 

The  essential  element  of  change  in  business  seems  to  be 
one  of  spirit  rather  than  form.  It  is  a  new  attitude  of 
mind.  It  may  well  find  expression  through  old  forms  of 
organization  and  yet  it  may  effect  a  complete  transforma- 
tion. One  part  at  least  of  this  new  spirit  is  a  desire  for 
more  knowledge.  Business  must  become  more  intelligent. 
The  management  itself  must  be  trained  in  foresight,  in 
sympathy,  in  a  general  knowledge  of  its  own  affairs.  The 
spirit  of  research  is  joined  with  the  new  spirit  in  business. 

Centralization  of  Control.  There  is  every  reason  to  be- 
lieve that,  in  spite  of  the  fact  that  all  extension  of  govern- 
ment control  over  industry  is  qualified  by  "  for  the  period 
of  the  war,"  there  will  be  a  permanent  extension  of  this 
kind  of  control.  The  railroad  systems  that  have  been 
built  up  on  an  individualistic  basis  are  becoming  so  thor- 
oughly "  scrambled  "  that  it  will  never  be  possible  again 
to  readjust  them  completely.  The  machinery  that  is 
being  set  up  for  greater  control  over  market  information 
will  not  likely  be  scrapped  with  the  coming  of  peace.     The 


368  COMMERCIAL  RESEARCH 

facts  gained  by  a  study  of  costs  in  certain  great  industries 
will  undoubtedly  form  the  basis  of  the  more  detailed  super- 
vision over  these  industries.  The  encouragement  of  for- 
eign trade  by  the  passage  of  legislation  friendly  to  the 
forming  of  combinations  will  not  be  withdrawn.  Business 
men  will  be  educated  to  expecting  and  to  accepting  a  cur- 
tailment of  their  former  individual  business  liberties,  for 
greater  and  better  liberties  of  industrial  and  commercial 
groups. 

In  this  relationship  between  business  and  government 
will  also  appear  the  influence  of  the  new  spirit.  It  is  be- 
lieved that  the  business  man  on  his  part  will  have  greater 
confidence  in  the  government  and  will,  therefore,  be  in  a 
more  friendly  attitude.  On  the  part  of  the  government, 
too,  there  will  be  a  change  in  policy.  Experts  have  been 
drawn  into  public  service  for  the  meeting  of  the  emergency 
demand,  but  it  seems  probable  that  these  experts  will  never 
again  return  to  their  former  status.  New  kinds  of  train- 
ing and  skill  will  be  employed  by  the  government  to  secure 
more  intelligent  direction  and  more  cordial  cooperation 
between  itself  and  business  men.  Herein  will  lie  one  of 
the  great  and  significant  changes  that  will  distinguish  the 
new  business  from  the  old.  What  the  President  of  the 
United  States  had  predicted  years  before  will  be  brought 
about  by  unexpected  means. 

Standards  of  Business.  One  of  the  cardinal  principles 
in  industrial  research  has  been  an  insistence  upon  stand- 
ard practice  and  standard  forms.  For  increased  produc- 
tion it  is  felt  to  be  necessary  to  reduce  all  processes  to  a 
single,  set,  stereotyped  process.  In  a  remarkable  manner 
business  is  being  standardized.  The  government  has 
greatly  aided  in  this  movement  by  its  demanding  from 
various  industries   an   intimate   cooperation   in   the   con- 


THE  NEW  BUSINESS  369 

struction  of  war  materials.  Speed  of  production  de- 
manded simple  and  standard  methods.  The  Liberty 
Motor  was  quickly  standardized,  the  types  of  aeroplane,  of 
machine  gun,  of  motor  truck  were  all  reduced  to  standard 
patterns.  It  became  possible  for  various  factories  in  dif- 
ferent sections  of  the  country  to  make  parts  of  these  ma- 
chines and  have  them  assembled  at  some  other  spot,  so 
that  each  one  could  devote  its  entire  capacity  to  large- 
scale  production. 

The  same  principle  is  being  carried  over  into  commercial 
practices.  In  the  more  difficult  matters  of  consumer  de- 
mand, there  is  a  similiar  movement  for  standardization. 
Take  the  example  of  style  goods.  There  was  an  evident 
movement  for  reducing  the  number  of  styles  in  clothing 
and  in  shoes  for  conservation  purposes.  The  government 
issued  very  definite  orders  in  regard  to  this  matter.  How 
far  it  would  have  been  carried  depended  directly  upon  the 
continuance  of  the  struggle.  When,  however,  this  war 
ended  so  suddenly,  the  influence  of  the  movement  was  not 
lost.  There  is  a  great  probability  that  standard  methods 
inside  the  factor}'  and  in  general  business  will  become  a 
permanent  element  in  the  United  States.  This,  too,  will 
be  a  characteristic  of  the  new  business. 

The  Emotional  Appeal.  One  characteristic  of  business 
in  time  of  war  that  distinguishes  it  sharply  from  normal 
peace-time  business  is  an  increased  element  of  emotional- 
ism. The  new  kinds  of  appeal  are  on  a  different  basis. 
There  was  the  spirit  of  sacrifice,  of  self-denial,  that  was 
affecting  business  relationships.  The  patriotic  appeal 
also  had  its  effect.  In  spite  of  profiteers  and  men  of  small 
caliber  and  mean  dispositions,  who  take  advantage  of  the 
situation  always,  there  was  a  great  movement  throughout 
the  country  for  placing  public  welfare  above  private  gain. 


370  COMMERCIAL  RESEARCH 

This  will,  to  some  extent,  be  a  part  of  the  new  business 
attitude.  Men  are  compelled  to-day  to  think  more  in 
terms  of  the  whole  nation  than  in  the  terms  of  their  indi- 
vidual business. 

Connected  with  this  new  element  of  emotion  in  business 
affairs,  there  is  the  effect  upon  leaders  in  business,  of  going 
to  the  capitol  of  the  United  States  and  assisting  in  mobil- 
izing the  great  industrial  and  commercial  forces  of  the 
country.  Probably  never  before  had  they  been  faced  with 
such  great  and  complex  problems  of  control.  They  had 
doubtless  never  been  compelled  to  look  at  problems  from 
so  many  different  angles,  to  weigh  and  consider  so  many 
conflicting  interests.  Such  an  experience  must  inevitably 
broaden  the  mind  and  make  the  judgment  more  generous. 
It  is  in  reality  compelling  the  business  leaders  of  the 
country  to  think  nationally  as  they  have  never  thought 
before.  It  is  a  significant  fact  when  one  great  business 
leader  publicly  confesses  that  his  hand  trembles  as  he  picks 
up  the  morning  paper.  This  means  that  he  is  appealed  to 
in  a  new  way ;  his  emotions  are  stirred  to  new  depths,  and 
he  is  not  likely  soon  to  forget  such  profound  experiences. 
As  to-day  he  finds  it  necessary  to  manage  his  business 
under  the  influence  of  such  emotions,  so  he  will  continue  in 
the  later  period  to  look  at  business  problems  from  much 
the  same  point  of  view. 

This  is  an  intangible  factor  and  is  difficult  to  evaluate. 
It  is,  nevertheless,  a  real  influence  and  it  seems  likely  to 
become  a  permanent  one.  The  old  saying  that  "  business 
is  business,"  that  all  personal  relationships  must  be  set 
aside  in  such  transactions  will  no  longer  have  the  force 
that  it  has  had  in  former  years.  This,  too,  will  be  a 
part  of  the  new  business  spirit  and  it  will  help  in  trans- 
forming business  practice  and  business  policies. 


THE  NEW  BUSINESS  371 

The  Expanded  Horizon.  In  his  own  eyes  the  American 
is  an  admirable  type  of  individual.  To  him  the  United 
States  is  "  God's  Own  Country."  He  is  proud  of  his  inde- 
pendence, his  lack  of  conformity  to  social  requirements, 
his  crude  individualism,  and  his  general  defiance  of  con- 
ventions. The  attitude  of  the  European  toward  him  has 
been  different.  He  has  been  called  crude,  provincial, 
narrow-minded,  and  prone  to  devote  all  his  efforts  to 
making  money.  One  must  confess  that  there  is  strong 
evidence  of  the  American  business  man  being  narrow  and 
provincial  in  his  point  of  view.  He  has  never  cared  for 
entering  foreign  markets  because  he  has  felt  that  his  own 
market  was  best.  He  has  never  given  serious  attention  to 
the  character  of  commodities  made  in  other  countries  be- 
cause he  has  stubbornly  insisted  that  his  own  manufacture 
is  superior.  This  attitude  must  be  wholly  changed  when 
the  new  business  comes. 

For  the  new  attitude  of  mind  a  new  phrase  has  been 
coined.  It  is  said  that  the  progressive  man  of  to-morrow 
must  be  able  to  "  think  internationally."  This  will  mean 
that  his  horizon  will  be  greatly  extended;  that  he  will 
be  able  to  look  beyond  his  own  narrow  market  into  foreign 
fields  ;  that  he  will  begin  to  study  the  products  and  methods 
of  his  foreign  competitors.  In  response  to  this  new  atti- 
tude the  daily  papers  and  business  magazines  will  carry 
far  more  world  news  than  before.  A  writer  of  vivid  imag- 
ination has  recently  described  the  situation  that  is  hoped 
for  when  this  expanded  horizon  becomes  a  reality. 

"  Will  it  be  strange  to  hear,  in  the  gossip  of  Wall  Street  and 
finance,  quotations  on  Argentine  Rails,  Russian  Industrials, 
Chinese  Oils  and  Coals  bandied  about  as  familiarly  as  Steel, 
Union  Pacific,  General  Motors? 

Will   one   inquire   why   his   banker   is   found   reading  more 


372  COMMERCIAL  RESEARCH 

cables  from  Buenos  Aires,  Peking,  and  Shanghai,  Bombay  and 
Petrograd,  along  with  full  dispatches  from  his  London,  Paris, 
and  Berlin  branches  ?  Will  it  be  surprising  to  find  local  mur- 
der stories  crowded  off  the  front  pages  of  newspapers  by  dis- 
patches about  American  successes  in  new  foreign  lands?  In 
public  gatherings,  clubs,  political  party  councils,  will  there  not 
be  new  interests  centered  in  the  groups  of  men  returned  from 
distant  lands,  alive  to  our  big  opportunity,  our  bigger  respon- 
sibility abroad,  through  their  man-to-man  contact  with  other 
races?  "  (Lewis  D.  Froelich,  quoted  in  C.  B.  Knoeppel,  "  In- 
dustrial Preparedness,"  p.  145.) 

Mobilized  Labor.  It  does  not  seem  possible  that  the 
labor  question  can  return  wholly  to  its  old-time  unsatis- 
factory condition.  There  have  been  new  appeals  to  the 
laboring  man,  and  new  appreciation  is  now  had  of  his  im- 
portance and  his  position.  For  a  common  purpose,  men 
trained  in  many  kinds  of  work  have  been  brought  together 
from  all  parts  of  the  country.  Under  the  pressure  of  cir- 
cumstances employers  and  employees  have  met  on  new 
terms.  With  the  arrival  of  new  business,  labor  will  be 
found  to  have  been  mobilized  in  a  way  unknown  before. 
There  will  probably  also  be  established  a  definite  national 
labor  policy  of  which  the  country  has  been  in  such  great 
need. 

This,  too,  will  be  a  part  of  the  new  spirit  of  business. 
It  may  be  that  the  labor  problem  will  not  seem  so  ominous 
under  these  new  conditions.  Possibly  misunderstanding 
has  been  the  great  obstacle  to  its  solution.  In  any  case, 
the  machinery  will  have  been  prepared  by  means  of  wliich 
intercourse  between  employer  and  employee  will  be  made 
far  easier.  The  continued  settlement  of  disputes  by  arbi- 
tration, the  open  and  frank  hearing  of  both  sides  of  the 
case,  the  introduction  of  democratic  policies,  will  un- 
doubtedly have  their  lasting  effect.     In  the  field  of  labor, 


THE  NEW  BUSINESS  373 

so  important  to  industry  and  commerce,  there  will  be  a 
new  spirit. 

Mobilized  Industry.  In  a  way  never  experienced  before 
by  the  business  man  of  the  country,  all  essential  industrial 
activities  have  been  concentrated  for  a  single,  common 
purpose.  National  demand  has  taken  the  place  of  indi- 
vidual demand,  and  national  interests  have  supplanted  pri- 
vate, individual  interests.  Investigations  have  been  made 
into  the  productive  capacity  of  various  plants  throughout 
the  United  States,  and  this  united  capacity  has  been  care- 
fully devoted  to  demands  of  offense  and  defense.  This 
means  a  new  sort  of  industrial  mobilization.  Great  fac- 
tories that  were  founded  for  peace  enterprises  have  been 
wholly  absorbed  in  military  uses.  There  has  been  also  a 
great  coordination  of  productive  activity  in  order  that 
the  supplies  that  are  so  vitally  necessary  for  successful 
military  achievement  may  never  be  wanting.  The  facts 
that  are  becoming  known  in  national  headquarters  on  the 
subject  of  productive  capacity  will  not  be  lost  after  the 
war  closes.  On  the  basis  of  this  new  knowledge  will  be 
founded  new  business  practices  of  far-reaching  conse- 
quences. 

Already  business  men  of  foresight  are  looking  ahead  to 
those  days  of  readjustment  and  are  planning  to  meet  the 
new  trials  which  they  are  sure  to  bring.  The  government 
likewise  has  already  begun  plans  in  anticipation  of  recon- 
struction difficulties.  The  problems  of  that  period  will 
be  of  many  sorts  and  of  great  difficulty.  A  list  has  been 
made  of  the  chief  ones  as  follows : 

1.  Demobilization  of  army  and  navy  including  reabsorption 
of  industrial  war  workers  into  peace  industries. 

2.  Industrial    readjustment    to    peace    conditions;    among 
which  may  be  stated: 


374  COMMERCIAL  RESEARCH 

(a)   Conversion  of  war  industries  to  peace  needs, 
(fo)    Restoration  of  industries,  curtailed  by  the  war, 

such,  for  example,  as  the  building  industry, 
(e)   The  sale  of  government  property. 

(d)  Cooperation    and    regulation    as    compared   with 

competition. 

(e)  Trade  organization,  which  may  result  from  the 

formation  of  war-service  committees  in  various 
industries. 

3.  Industrial  relations  between  labor  and  capital. 

4.  Foreign-trade  problems  which  are  connected  with  the 
questions  of  continued  export  and  import  control. 

5.  The  tariff  problem  as  it  may  be  affected  by  terms  of 
peace. 

6.  Industrial  and  scientific  research  under  the  direction  of 
governmental  bureau. 

7.  The  relation  of  the  fuel  problem  to  the  general  industrial 
and  commercial  problem. 

8.  The  question  of  using  the  merchant  marine,  which  is 
being  built  in  the  shipyards  of  the  United  States. 

9.  The  entire  transportation  problems  as  they  will  be 
affected  by  extended  government  regulation  and  con- 
trol. 

10.  The  question  of  education,  particularly  in  reference  to 
industry  and  commerce. 

11.  The   entire  question   of  insurance,  including  industrial 
and  general  social  insurance. 

12.  Questions  of  finance,  to  be  placed  under  the  direction  of 
the  Federal  Reserve  Board. 

Such  a  movement  as  this  will  work  for  a  new  kind  of 
business  in  the  United  States.  There  will  doubtless  result 
from  it  a  higher  degree  of  national  unity  than  has  existed 
in  the  past.  There  is  no  evidence,  however,  that  the  old 
industrial  or  commercial  organizations  are  to  be  displaced. 
Once  again  it  is  a  new  spirit  working  through  the  old 
system.     That  its  effects  will  be  of  fundamental  impor- 


THE  NEW  BUSINESS  375 

tance  and  far-reaching,  there  can  be  no  possible  question. 
It  is  clear,  then,  that  from  this  mobilization  of  industry 
will  result  another  element  in  the  new  business. 

New  Legislation.  Not  the  least  among  the  changes  in 
business  will  be  that  of  a  new  attitude  toward  legislation 
that  deals  with  business  affairs.  However  one  may  feel 
about  the  legislation  of  the  past,  as  to  whether  there  has 
been  too  much  or  too  little,  a  consensus  of  opinion  will 
show  that  it  has  not  been  of  the  desired  kind.  One  cliicf 
reason  for  this  defect  is  that  men  have  not  been  sufficiently 
well  informed  on  the  subject.  Legislation  has  not  in  any 
sense  been  careful  or  scientific  in  the  United  States.  As  a 
matter  of  fact  it  has  rarely  been  fully  intelligent.  The 
far  greater  part  of  it  has  been  a  matter  of  emergency 
when  there  has  not  been  sufficient  time  for  careful  investi- 
gation or  for  a  thorough  understanding  of  the  issues  in 
the  case.  Such  legislative  work  must  be  a  thing  of  the 
past. 

One  method  of  accomplishing  the  ideals  of  the  new  busi- 
ness will  be  through  more  intelligent  legislation.  "  The 
attainment  of  industrial  democracy,"  says  one  writer,  on 
the  subject,  "  must  come  through  scientific  legislation." 
It  is  clear  that  more  intelligent  legislation  can  come  only 
from  a  more  thorough  knowledge  of  facts.  In  order  that 
the  facts  may  be  collected  and  interpreted,  research  of 
3ome  sort  is  necessary.  Once  again  the  discussion  comes 
back  to  the  central  point  of  all  industrial  and  commercial 
progress  —  a  more  intelligent  use  of  business  data.  One 
thing  tliat  is  necessary  to  accomplish  the  aim  expressed  so 
frequently  in  these  latter  days,  to  give  the  control  of  gov- 
ernment back  to  the  people,  will  be  attained  only  through  a 
more  intelligent  class  of  citizens  in  and  out  of  business. 


376  COMMERCIAL  RESEARCH 

Possibly  another  element  in  the  new  business  of  to-morrow 
will  be  a  more  intelligent,  a  more  scientific  kind  of  business 
legislation. 

New  Aims  of  Organization.  One  fault  found  with  busi- 
ness as  organized  on  the  private,  individualistic  basis  is  its 
lack  of  plan.  Economists  have  frequently  said  that  pro- 
duction as  a  whole  is  without  plan.  All  attention  and 
effort  has  heretofore  been  devoted  to  the  organization  of 
details  within  the  plant  or  store.  The  large  problems, 
the  external  problems,  have  been  left  to  take  care  of  them- 
selves. This  has  resulted  in  lack  of  adjustment  between 
demand  and  supply.  It  is  a  severe  criticism  upon  the 
intelligence  of  production  managers  that  the  capacity  of 
manufacturing  plants  has  so  frequently  outrun  all  possible 
demand  for  goods.  It  is  estimated  to-day,  for  instance, 
that  the  flour  mills  throughout  the  country  could  readily 
produce  twice  the  amount  of  their  present  output.  This 
could  be  done  also  without  working  overtime  and  without 
increasing  the  number  of  shifts.  How  is  it  possible  for 
such  an  industry  to  continue  successfully  on  a  basis  of  this 
kind?  There  has  also  been  the  well-known  estimate  that 
normal  demand  for  steel  products  would  not  utilize  more 
than  65%  of  the  country's  productive  capacity.  There 
is,  again,  the  question  of  mining  coal,  and  particularly  the 
mining  of  bituminous  coal.  So  many  mines  have  been 
opened  and  such  a  great  output  of  coal  has  been  made 
possible  that  it  was  necessary  for  the  mine  operators  to 
neglect  all  veins  or  all  pockets  in  the  mines  that  were  dif- 
ficult of  access  or  expensive  to  mine.  Sucli  a  situation  is 
obviously  uneconomical.  These  arc  but  samples  of  count- 
less instances.  There  is  need  of  some  kind  of  readjust- 
ment. 

If  one  adds  to  the  above  deplorable  condition  the  greatly 


THE  NEW  BUSINESS  377 

increased  productive  capacity  that  has  developed  under 
the  war  demand,  he  will  realize  the  danger  that  will  result 
when  this  new  demand  ceases.  Great  numbers  of  indus- 
tries have  been  increased  in  capacity.  One  manufacturer 
of  national  reputation  who  has  received  very  large  war 
orders  has  increased  his  production  by  50%.  Already  he 
is  making  a  survey  of  the  country  for  the  purpose  of  deter- 
mining how  best  he  can  divert  this  increased  capacity  to 
peace-time  enterprises.  This  man  is  only  one  among 
many  with  the  same  problem.  Without  some  kind  of 
supervision,  some  kind  of  comprehensive  planning,  disaster 
will  almost  inevitably  result. 

The  chief  difficulty  in  the  past,  it  seems,  has  been  that 
production  was  wrongly  organized.  "  Production  is  not 
organized  primarily  for  supplying  needs ;  but  for  the  pur- 
pose of  extending  profits  to  investors."  (The  Annals, 
Vol.  LIX,  p.  272.)  The  change  will  need  to  come,  there- 
fore, in  the  aims  of  organization.  They  doubtless  will 
come  under  the  new  regime.  The  very  surveys  planned 
by  the  government  will  tend  to  change  the  purpose  of 
productive  organization.  A  better  adjustment  is  almost 
sure  to  result.  This,  too,  will  be  an  element  in  the  new 
business. 

The  Corporation.  Much  fault  has  been  found  with  the 
type  of  business  organization  that  has  dominated  in  the 
past  years.  The  corporation  has  been  called  a  "  being 
without  a  soul."  There  has  been  an  element  of  imperson- 
ality connected  with  it  which  in  the  judgment  of  many  has 
led  to  most  of  the  wrongs  that  have  developed  from  its 
activities.  No  individual  seemed  directW  responsible  for 
its  acts ;  no  one  man  bore  on  his  conscience  the  burden  of 
the  consequences.  These  things  must  be  changed.  The 
entire  attitude  of  the  mass  of  people  must  become  more 


378  COMMERCIAL  RESEARCH 

friendly  to  the  type  of  organization  which  is  to  prevail. 
How  this  is  to  be  done  is  the  great  problem. 

There  is  no  evidence  to-day  that  the  corporation  as  a 
type  of  business  organization  is  to  be  discarded.  There 
is  a  feeling,  however,  that  it  must  be  given  a  soul  and  a 
conscience.  Some  one  must  be  directly  responsible  for  the 
results  of  its  acts.  Better  representation  both  of  the 
small  investor  and  the  workman  must  be  had  in  its  manage- 
ment.     This,  too,  will  be  an  element  in  the  new  business. 

Better  Organization.  Industrial  research  has  con- 
stantly pointed  to  the  need  for  more  thorough  organiza- 
tion within  the  business.  American  methods  have  noto- 
riously been  wasteful  methods.  The  new  cry  is  for  conser- 
vation, not  only  of  all  natural  resources  but  also  of  human 
life.  Organization  must  extend  more  and  more  into  detail 
and  it  must  broaden  to  cover  the  entire  country.  This, 
too,  is  a  result  to  be  derived  from  the  experiences  of  the 
war. 

The  adjustments  which  are  to  underlie  the  new  type  of 
organization  have  been  outlined  as  follows : 

First,  Investigation:     Finding  out  what  to  do. 

Second,  Organization:  Building  the  machine  that  will  prop- 
erly carry  out  what  should  be  done. 

Third,  Records:  Gatliering  facts  and  statistics  to  be  used  by 
this  organization  in  arriving  at  the  right  kind  of  conclu- 
sions in  carrying  out  what  should  be  done. 

Fourth,  Planning:  Logically  arranging  and  coordinating  all 
details  so  that  the  various  steps  can  be  rapidly  and  ef- 
ficiently carried  out. 

Fifth,  Standardization:  Carrying  out  the  steps  determined  or 
actually  doing  tlie  work  in  a  proper  manner.  (C.  E. 
Knoeppel,  "  Industrial  Preparedness/'  p.  5Q.^ 

If  these  principles  are  applied  both  in  individual  enter- 


THE  NEW  BUSINESS  379 

prise  and  in  all  business  combined,  the  results  will  be  diflB- 
cult  to  determine.  One  thing,  however,  is  clear.  In  doing 
this,  the  United  States  will  be  falling  in  line  with  the  other 
great  nations  of  the  world.  More  complete  industrial  and 
commercial  organization  along  broad  national  lines  is  to 
be  a  large  element  in  the  new  business. 

Control  of  Essential  Resources.  There  is  another  fea- 
ture of  the  new  business  that  needs  consideration.  It 
may  be  defined  as  the  control  of  industry  through  a  con- 
trol of  essential  raw  materials.  Nations  are  just  awaken- 
ing to  the  significance  that  lies  in  the  possession  of  basic 
materials.  Compactly  stated,  the  situation  is  this:  Fac- 
tories may  be  built  anywhere ;  they  are  mobile ;  they  may 
be  carried  to  raw  materials,  to  a  labor  supply,  or  to  the 
proximity  of  a  market.  Labor,  too,  is  relatively  mobile 
and  may  increase  its  capacity  in  response  to  the  need. 
But  the  resources  of  raw  materials,  the  slow  results  of 
natural  laws,  are  fixed,  are  immobile,  and  access  to  them 
must  be  kept  open  at  any  cost. 

Resources  may  become  essential  in  three  different  ways. 
There  are  the  basic  materials  of  industry  such  as  coal, 
iron,  petroleum,  wood,  tin,  rubber,  etc.  They  underlie  a 
vast  number  of  economic  activities.  They  are  required  by 
the  welfare  of  all  the  great  civilized  nations.  This  fact 
makes  them  essential.  There  are  other  materials,  such 
as  cotton,  wool,  wheat,  corn,  which  require  certain  climatic 
and  soil  conditions.  The  standard  of  living  of  the  greater 
part  of  the  world's  population  demands  these.  Then  there 
are  materials,  limited  in  quantity,  nonreproducible,  that 
are  required  by  the  best  manufacturing  processes.  The 
aluminum  industry  requires  cryolite,  which  is  found  only 
in  a  mine  in  Greenland,  controlled  by  the  Danish  Govern- 
ment.    Many  of  our  familiar,  commonplace  conveniences 


380  COMMERCIAL  RESEARCH 

require  asbestos,  the  source  of  which  is  in  Canada  and 
South  Africa.  Gutta-percha  is  necessary  for  ocean 
cables ;  it  is  found  in  British  possessions. 

Control  over  such  materials  offers  a  great  bargaining 
power  for  the  individual,  corporation,  or  state  having  it. 
In  this  connection  the  following  excerpts  from  a  recent  re- 
port of  the  British  Dominions  Royal  Commission  is  sig- 
nificant: 

"  It  is  not  difficult,  however,  to  imagine  conditions  even 
in  times  of  peace,  in  which  it  might  become  desirable  to 
use  the  possession  of  these  assets  as  an  instrument  of 
commercial  negotiation."      (P.  163.) 

The  bitter  experience  of  England  in  the  European 
war  will  not  readily  be  forgotten.  Already  her  manufac- 
turers have  made  great  progress  in  developing  their  own 
"  key  industries."  The  resolution  made  by  Great  Britain, 
France,  and  Italy  at  the  Economic  Conference  held  in 
Paris,  1916,  gives  evidence  of  a  widespread  desire  for  na- 
tional independence  in  supplies  of  essential  raw  materials. 
There  is  a  warning,  also,  in  the  report  quoted  above. 
"  We  regard  it  as  vital  that  the  Empire's  supplies  of  raw 
material  and  commodities  essential  to  its  safety  and  well- 
being  shall  be  as  far  as  possible  independent  of  outside 
control."      (P.  183.) 

There  can  be  no  doubt  that  this  newly  recognized  power 
will  have  an  influence  upon  the  business  relations  of  the 
future,  both  industrial  and  commercial.  It  must  be  re- 
membered, however,  that  business  chafes  under  such  con- 
trol. There  is  an  immediate  reaction  to  escape,  to  break 
down  the  barriers  or  to  find  a  new  road.  Note  the  fever- 
ish search  for  new  sources  of  potash,  of  nitrates,  of  man- 
ganese. The  minds  of  thousands  of  alert  business  men 
will  be  at  work  to  throw  off  the  yoke.      The  one  answer  yet 


THE  NEW  BUSINESS  381 

is  substitutes.  But  every  new  line  of  endeavor  modifies 
business. 

Socialization  of  Industry.  A  movement  is  gaining  im- 
petus both  in  Europe  and  America  to  remove  from  the 
domain  of  private-property  rights  any  industry  that  af- 
fects the  well-being  of  the  entire  social  group.  In  the 
United  States  such  an  industry  becomes  a  public  utility ; 
that  is,  private  property  devoted  to  public  service,  and 
passes  under  the  supervision  of  a  public  service  commis- 
sion. In  England  measures  have  been  urged  to  national- 
ize British  coal  mines,  railways,  and  ships.  In  Italy  there 
is  a  marked  trend  toward  state  monopoly  of  essential  food- 
stuffs and  raw  materials.  In  Germany  there  has  been  an 
organized  effort  to  socialize  coal  mines,  gas,  water,  electric 
works,  and  tramways.  Even  certain  private  companies 
like  the  Rhenish  Upholstery  Cloth  Weaving  Company  are 
transforming  themselves  into  community  businesses. 
"  The  whole  economic  life,"  says  a  recent  traveler  in 
Russia,  "  trade,  and  industry  have  been  almost  completely 
nationalized,  socialized,  and  municipalized.  Each  large 
factory  has  become  a  small  state  for  itself."  There  have 
been  also  the  proposals,  made  to  the  Peace  Conference  at 
Paris,  to  internationalize  navigable  waterways,  coaling 
stations,  and  strategic  harbors.  This  movement  may  be 
called  the  socialization  of  industry. 

It  really  does  not  matter  whether  the  individual  may 
approve  or  disapprove  of  the  extension  of  general  control, 
the  substitution  of  general  welfare  for  private  gain  in 
management  of  basic  enterprises.  The  fact  is  that  this 
influence  is  now  at  work ;  its  leaven  is  already  permeating 
the  industrial  and  commercial  loaf.  It  is  becoming  a  part 
and  probably  a  permanent  part  of  future  competition. 

Productive  Capacity  of  a,  Feople.     There  will  be  in  the 


382  COMMERCIAL  RESEARCH 

business  of  the  future  a  more  thorough  knowledge  of  world 
resources,  of  world  demand,  of  costs.  What  will  be  done 
with  this  increased  intelligence  remains  to  be  seen.  It  will 
still  hold  true,  however,  that  the  greatest  returns  will 
accrue  to  those  who  have  the  superior  productive  capacity. 
They  gain  most  from  ever}^  bit  of  new  information,  from 
every  new  invention  or  discovery,  who  apply  what  they 
know,  most  intelligently,  effectively,  and  persistently. 
After  all,  what  will  count  for  most  in  the  business  of  com- 
ing years  is  the  training,  the  skill,  the  intelligence,  the 
willing  cooperation,  and  the  persistent,  unwearied  effort 
of  each  people. 

Technical  skill  and  managerial  ability,  the  general  level 
of  intelligence  among  a  people,  combined  with  the  will  and 
capacity  to  use  these  powers  effectively,  will  overcome  all 
handicaps.  Every  group  will  find  its  own  economic  level, 
that  level  determined  by  its  relative  productive  capacity. 
Fortunate  geographical  location,  where  resources  are 
abundant  and  communications  are  easy,  will  give  advan- 
tage to  some.  This  is  inevitable.  All  of  these  things, 
however,  may  be,  indeed  have  been  and  will  be,  overcome. 
The  collective  will  of  a  people  cannot  be  withstood. 

More  Intelligent  Business.  All  the  changes  that  have 
been  outlined  here  about  which  evidence  now  exists  point  to 
certain  definite  conclusions.  Both  in  individual  enterprise 
and  in  business  as  a  whole  there  is  a  common  desire  for  a 
fuller  knowledge,  a  greater  intelligence.  It  is  into  terms 
of  more  intelligent  business  control  that  the  new  spirit 
must  be  translated.  In  this  discussion  the  spirit  of  re- 
search has  been  called  an  attitude  of  mind,  and  from  this 
attitude  of  mind  will  largely  result  the  changes  in  business. 
The  basis  of  intelligence,  of  better  business  control,  rests 
upon  a  fuller  knowledge  of  facts.     Facts  about  industry 


THE  NEW  BUSINESS  383 

and  commerce  are  to  be  secured  most  effectively  by  means 
of  research.  It  is,  then,  by  means  of  research,  industrial 
and  commercial,  that  the  new  ideals  of  business  are  to  be 
realized. 

Already  the  movement  for  the  application  of  scientific 
principles  to  problems  of  industry  is  gaining  momentum. 
The  movement  for  science  in  management,  so  far  as  pro- 
duction is  involved,  is  making  headway  in  individual  indus- 
tries, and  through  studies  for  the  promotion  of  efficient 
methods  is  being  carried  into  a  broader  realm  of  business. 
The  new  field  is  that  of  commercial  research.  Here  only 
a  beginning  has  as  yet  been  made.  Interest,  however,  has 
been  awakened  in  the  subject,  and  it  is  believed  that  it  will 
be  developed  with  enthusiasm  and  with  all  possible  rapid- 
ity. Numerous  pleas  have  already  been  made  for  more 
accurate  and  more  adequate  accounting  systems.  In  fac- 
tory and  in  store  there  is  need  for  useful  records.  If  they 
can  be  of  a  uniform  character  in  order  that  the  data  se- 
cured tlirough  them  can  be  compared,  the  day  of  a  fuller 
knowledge  and  a  more  intelligent  control  of  business  will 
be  greatly  hastened.  In  addition  to  systems  of  accounts, 
there  is  also  the  need  for  more  general  business  research. 
It  has  been  the  purpose  of  this  discussion  to  point  out 
the  general  principles  by  which  this  research  may  be  car- 
ried on. 

Conclusion.  In  business,  as  in  most  complex  and  far- 
reaching  activities,  one  can  find  the  details  for  which  he 
is  seeking.  The  optimist  will,  no  doubt,  be  able  to  dis- 
cover the  basis  for  his  faith  and  hope.  He  will  emphasize 
those  elements  that  are  good  and  will  subordinate  those 
that  are  bad.  The  pessimist,  also,  will  find  evidence  for 
his  position.  He  will  emphasize  the  bad  and  minimize  the 
good.     In  all  human  activity  it  takes  considerable  faith 


384  COMMERCIAL  RESEARCH 

to  see  that  progress  is  actually  made.  No  one  will  ques- 
tion the  fact  that  there  are  in  business  to-day  many  men 
who  need  regeneration.  It  is  a  most  difficult  task  to 
raise  the  general  plane  of  business  practice.  Probably 
the  most  hopeful  thing  in  the  business  of  the  future  is 
that  the  great  leaders  in  the  country  have  had  the  vision 
of  a  new  type  of  business  and  are  hopeful  that  it  may  be- 
come a  reality. 

Heads  of  great  corporations  have  been  willing  to  go  on 
record  as  declaring  for  a  new  standard  for  judging  busi- 
ness practice.  Their  words  spoken  in  this  period  of  tran- 
sition are  not  likely  to  be  forgotten.  It  is  believed  that 
the}'^  were  not  intended  to  be  forgotten.  As  an  example 
of  this  faith  and  hope  that  inspires  the  leaders  in  busi- 
ness activit}^,  the  following  will  serve  the  purpose :  "  Be- 
fore the  really  big  work  of  perfecting  American  busi- 
ness can  be  done,  there  must  be  a  change  of  heart  on  the 
part  of  both  business  men  and  those  public  men  placed 
by  the  people  in  charge  of  government."  (E.  N.  Hurley, 
"The  Awakening  of  Business,"  p.  296.)  This  clear  rec- 
ognition of  the  problem  is  a  great  advance  toward  find- 
ing a  solution  for  it.  There  are  many  others  who  will 
join  in  the  belief  that  this  change  of  heart  is  actually  in 
progress. 

In  a  more  idealistic  style  the  future  of  American 
business  has  been  described  by  a  great  political  leader 
who  has  appealed  in  an  open  and  eloquent  manner  to  the 
better  impulses  of  business  men.  There  is  an  element  of 
contagious  enthusiasm  in  his  conce])tion  of  the  new  type 
of  business.  "  Are  you  not  eager,"  he  says,  "  for  the 
time  when  the  genius  and  initiative  of  all  the  people  shall 
be  called  into  the  service  of  business.?  when  newcomers 
with  new  ideas,  new  entries  with  new  enthusiasms,  inde- 


THE  NEW  BUSINESS  385 

pendent  men,  shall  be  welcomed?  when  your  sons  shall  be 
able  to  look  forward  to  becoming,  not  employees,  but 
heads  of  some  small,  it  may  be,  but  hopeful,  business, 
where  their  best  energies  shall  be  inspired  by  the  knowledge 
that  they  are  their  own  masters,  with  the  paths  of  the 
world  open  before  them?  Have  you  no  desire  to  see  the 
markets  opened  to  all?  to  see  credit  available  in  due  pro- 
portion to  every  man  of  character  and  serious  purpose 
who  can  use  it  safely  and  to  advantage?  to  see  business 
disentangled  from  its  unholy  alliance  with  politics?  to 
see  raw  material  released  from  the  control  of  monopolists, 
and  transportation  facilities  equalized  for  all?  and  every 
avenue  of  commercial  and  industrial  activity  leveled  for 
the  feet  of  all  who  would  tread  it?  Surely,  you  must 
feel  the  inspiration  of  such  a  new  dawn  of  liberty ! " 
(Woodrow  Wilson;  "  The  New  Freedom,"  pp.  220-221.) 
That  great  changes  of  some  sort  will  inevitably  come 
and  come  quickly,  there  is  no  reason  to  doubt.  The  es- 
sential point  at  issue  is  whether  the  changes  will  be  for 
the  better  or  for  the  worse.  The  answer  to  this  pertinent 
inquiry  will  depend  very  largely  upon  the  increased  in- 
telligence of  those  engaged  in  business.  The  practices 
must  become  more  fair  to  all  parties  interested.  Compe- 
tition as  a  system  for  organized  business  must  become 
more  efficient,  or  be  displaced.  Both  of  these  desired 
ends  can  be  achieved  by  a  fuller  knowledge  of  business 
principles.  There  is  no  other  way.  "  Competition  can- 
not be  fair  unless  it  is  intelligent."  (E.  N.  Hurley,  "  The 
Awakening  of  Business,"  p.  28.)  The  direct  road  to 
greater  intelligence  in  business  is  through  industrial  and 
commercial  research. 

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